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tv   C-SPAN Weekend  CSPAN  May 15, 2011 1:00pm-6:00pm EDT

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we haveecently formed a $12 billion joint venture around current technology for producing large scale amounts. we take it to the next level. we are talking about using enzymes. it goes straight from the biomass to a gasoline or diesel equivalent. >> we are the largest producer of renewable. that is a very accurate business for us. we believe it'll be sometime before they come to market. there is energy efficiency.
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it makes investments. it has energy on. that is a big opportunity. >> a couple of us have a couple of follow- questions i think there is that anyone here who this not do this. what we mean by comprehensive tax reform, the general feeling is the the broadens the base. this seems to be a trend. it is similar on the corporate side.
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we lower it. by definition of we are doing that, we are starting to cut back. whether it is biofuels or what. your general advice to us, does that mean that maybe we should lower the rate and also cut back? by definition we have to. this is hard to do. >> i would support all of that. i think everything for everybody everywhere has to be on the table.
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we will repeal a for everybody across the board. the city will broaden the tax base. i only use 199. there is a whole host of elements to our tax code that is very complex. simplifying the tax -- sen use it. some do not. we are creating this. we have to make it more attractive for people to invest and create revenues. >> you go along with them. your scaling back. -- you are scaling back. >> it needs an overhaul.
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i tend to live by making the united states more attractive. do not harm american competitiveness overseas. it brings wealth back to this country. it keeps the playing field level. we love to compete. we thrive on competition. >> you want to make it simpler? make in a way that is consistent for everyone? there is certainty that we do not anticipate. it will promote investment. this will help with respect to employment. anything that can increase competitivenesin terms of investment i think would be good.
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the more predictable the better. john number one is to get investment up. >> what is your view? >> it is exactly as we have been saying. some of the complexity is taken out. they make it too complicated. much business income is no longer incorporated. it is worth individual income xe this greatly complicates the question. weave more on this basis by far. it is a recent trend.
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he may want to be an investor. let me give you a chance. >> i am glad this came up. it is very important. i think comprehensive reform, i agree with the comments. >> i a agreed. i would hope that over time it would raise more revenue. i think this is what we are trying to achieve. >> you are talking about the subchapters. this is an important one. so many are structured under the tax code. if you do it with corporate tax, we will have to deal with that. once it is structure, he can allow them to check the box.
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they do not file under the corporate tax code today. it is not advantageous for them to do so. they may find it to be more than having to file it on the individual. this is the dual capacity question. all companies should get a tax credit. foreign taxes are paid to the important countries. at is the general rule. he did not give a credit for royalties. i thi the question is characterized in the payment. i think the goal is that it is
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the first place to structure it. in the company probably gets that credit. it is trying to figure al what is this. maybe some move along. companies might make a profit. it is atactive. it is a royalty from what is a tax payment. that is the goal. >> i appreciate the recognition of that. i do not disagree with what you said. it is the complexity of dealing with the whole country's tax system and how it is characterized.
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it is a difficult task. it is one that we must prove to the irs. much to understand the challenge. others have talked about going to a system of a tax code that is more aligned with what the rest of the world has. it is getting is structured so it does not violate the principle. some companies are at a disadvantage overseas. i think that is achievable. we have a way to move a system like that. that simplifies an awful lot of the complexity that exists.
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>> this is going to be incredibly difficult. it will require good faith of everybody. it has to be shared. everyone will have to get in a little bit. >> thank you. >> i would like to comment on a few items. they implied the roughly $60 billion in tax incentives that we were discussing is the key factor in reducing our deficit. my friend from maryland made a
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similar one arguing that the numbers are insignificant. we are worried about the removal affect of these domestic services. the testimony is clear. this will drive production offshore. this is what has been said here today. there were spending cuts proposed by dr. coburn of similar size. it was a member of our committee. the spending cuts by another version of shares sacrifice. it did not involve low income folks are infrastructure investments. this is an example.
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there no bones about it. if he took off five of you, if we combine them all, it did give them only 6% of the world oil production. 6% of the global oil production is less than 2% of global oil reserves. we are requiring them to go out and the world.
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there are nationally owned oil companies. this is 1.4%. look at the opec nature -- nation. it is ght on down the line. here is where we are. we are this small little sliver. all these others are oc companies. they are the production facilities. you are the big five american companies. am i wrong? there is a small slice of production. it is listed on the church.
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these numbers look like this as well. we do not represent the reserves of the production. we do represent an important purchase of pan a the development. what you had with the rep with our share of what we want. >> did i hear the correctly? there is enough domestic energy production. i believe you said that you did it to develop oil reserves. it has over a $4 billion to produce domestic oil.
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the government will refuse to allow you to go ahead. >> it is emphasized by what is happening in alaska. we are something around $3.5 billion in. you have to be able to do so. want to emphasize the impact is something like that. it indicates that it could be 750,000 barrels of a multi decade base. >> we cannot get the permission. >> this is not reflect well on the united states. >> one of the first acts was across 77 onshe.
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it is after years of going to environmental groups paye. we finally got there. it was one>> it was one of the t signals you could send to the oil industry. could you elaborate? and also answer this question before we finish. assuming this legislation passes. will it bring down the prices of oil at the pump? you don't have to use my terms. that answer that for me. why are we doing this? why are we putting you at a disadvantage wn you're that little small slice of the overall pie.
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and you are competing agast nations that have oil. nationalize the oil companies. >> the competitive disappointment is exactly right. the chart is accurate from what my information would tell me as well. we have to be careful is not to lose this enormous opportunity in the u.s.. we have a tremendous number of resources. it is a matter of access. it goes beyond the limited part of the conversation today. to look at a real energy policy, we could have a significant impact on the economy, the deficit, the trade balance, and the energy security of this company. >> how do any of you believe that this bill will help decrease the crisis at the pump?
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>> no. >> know. >> know. >> some people are upset i have taken this time. i am the only one here on the republican side because everybody had to go the white house. i would hope that i will be granted a little bit more time. >> i also want to know where we are at this point to 1/2 hours into the hearing. you will have done that as major oil companies, a dramatic about- face this morning. in 2005, you were there. you said you did not need tax incentives to drill for oil. today you have come to say you have got t have them when oil is at $100 a barrel. that position defies common sense and even adjusted for
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inflation, you're doing better now than in 2005. th debate will go forward, but i want to make sure that folks paying attention to this pickup on that as we wrap up. the tax credit that exists for blending ethanol. you are required by lawo implement the federal renta standard. your testimony says, and i quote, bp is already one of the largest lenders of ethol and the nation. my question is, why should oil companies, not just years, beginning $6 million a year in tax credits for complying with an existing law to blend ethanol? >> that law was introduced as a
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biofuel into the u.s., and it has been very successful. we're not opposed to the transitional incentive being phased out. we think it is important for second-generation biofls. >> i am glad we are noting that. there is no question in terms of energy policy that often you need an incentive to get something off of the ground. clearly what he is talking about is that incentive made since the beginning, but it doesn't make sense now. i think it is constructive that you said you'd be willing to phase it out. i thank you. >> i think that we should all look at them. all the tax expenditures. all of the incentives to see which ones are more effective
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than others and we can get rid of a few of them. it is a difficult question for all of us. cholera about a hundred and 31 tax provisions. they are a nightmare. it makes no sense. under an 41 times every 18 months, that they have to be paid for is just maddening. we will be looking at a lot of these provisions and others. i like to eliminate a lot of those so there is not a lot of uncertainty surrounding our side and from that side. we will be looking at expenditures to see which ones are effective. >> let me concurred in regard to tax reform and assure you that there is great interest to making sure that the tax cut is
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more competitive and predicble. it is extremely important for investors, and we have to get investors of knowing what the ground rules are. i will only make one comment in response. it has all been repealed and equals about 3% of the profits of the five companies. most of these profits are going back to the shareholders. i don't see the impac that the senator is referring to on either jobs or any of the issues that you bring up. >> they are making the point, if you're going to do this, treat them fairly along with other companies. i agree that weave to do tax
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reform, and that includes looking at everything. i don't want them mistreated because they are an industry that people hate. >> let me bring it back to the point that has been used here. i understand companies are taking the tax provisions are taking advantage of it. if you're not doing that, you have problems with your shareholders. understand why we think this is either unwarranted incentives or subsidies. it was a response to dealing with the fact that our corporate taxes are not border adjusted verses in europe and other countries. we did something to help foreign sales. that is the genesis of section 199. we wanted to be able to
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compensate for the fact that our foreign competitors had an advantage on the way the taxes were handled at the border. my understanding is that in your industry, there is more important product have been exported. it does not make a lot of sense for you to get a tax advantage under the philosophy that this bill was originally created for. the rule of the provisions out of compliance and we had to go to a general manufacturing provision. that is how this came about. we have questions as to whether this is a reasonable tax advantage to the oil industry. it is not traditional manufacturing. and it is not the type of export activity that was disadvantaged by the corporate structure to
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have a product enter t international marketplace. this is the largest single source of the revenues we are talking about today. it has its genesis of helping the united states manufacturers get a product into the international marketplace. which is not the circumstances of the product that you're basically involved with. the final product is mostly domestic. i am sure some of it is the international marketplace. it is certainly not the target for why this was put in the tax code. anyone disagree with that? >> if you want to repeal it, repeal it for everyone. i am not sure that the coffee roasters are growing coffee here
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and exporting coffee. i am not sure the newspaper companies are exporting their newspapers. i don't disagree with your comment or your premise. the only point is, if you want to get rid of them, get rid of them for everybody. >> some manufacturing companies, thiss rough justice and it really helps them. i would rather do it directly with foreign sales. i would like to reform our tax code so that we can have a preventive basis. we should tailor this more to the purpose of helping exporters that manufacture in the united states. >> cannot treat companies in the same industry different and don't treat industries are principle of exports differently. >> is tough to go on line.
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i understand the point that you are raising. i'm only pointing out that that is why some of us look at section 199 as it relates to the oil industry as an unjustified incentive or as a subsidy because we don't believe it was the original intent to benefit your type of activity. i did want to put that into record. >> i want to repeat and expand a little bit about what i said earlier. i do believe that you are out of touch. i'll believe that that does not mean the you are not good people or that you don't participate in your communities. or along with the work you have to do. and in the main reason that you are out of touch, partilarly with respect to americans and the sacrifices that we are having to look at in terms of
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having to come close to balancing a budget is a you never lose. you have never lt. how you always prevail. you always prevail in the halls of congress had to do that for a variety of reasons because of lobbyists, friends, all the places you do business. i don't really know any other business that never loses. that always fails to do as well as you do. one of the problems, and you can tell this in no way, is just the size of the amount of money you take. it is really hard for average people in west virginia to even come close to understanding. they don't think that that can come by in the regular order of the way the world treats them. they are always in the process of losing.
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everything is an uphill battle. so my vw of my work in the west virginia that is mostly mountainous, it's that i am holding on to the huge boulder with both hands and trying to push it up hill. is every d that i feel that. and i love the feeling. but i know if i take one hand off, high and the boulder disappear into the ether or the opposite of the ether. the gulch. that leads me to say, this is my opinion. but i really believe its. i've never seen any industry so cosmically successful. think you all have a great sense of assurances as you're sitting there, more so than
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usual. you have a great sense of assurance spearheaded of think you feel threatened by anything that is going on here. and i guess you don't have a reason to feel threatened because of the way that votes lined up in this present congress. but i yearned for one of you to see what average people are going through. is to figure out some way in your mind, what can i do as a very large and profitable company to make sure that that bad thing doesn't happeto that person, losing health insurance or losing a unemployment insurance. the endless number of things that people have to worry about every ngle day. you don't have to worrybout those.
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you have the money to have planes and our people don't. i want to stipulate that. and say one more thing. the greatest danger to this country right now other than the deficit is something called cyber security. we're writing of bill and the congress committee of the homeland's security is participating in that. he comes up with a solution that i hope we can pass this year. the is an enormous amount of work that companies have to go to the being attacked already. the pentagon has hundreds of thousands, maybe millions of times a day but peoe getting secrets. anybody can do that.
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so how they defend themselves? they have to go through all kinds of security measures. i met with most of them yeerday. particularly the bigger ones, you're going to have to bear the expense. we don't have the money to do that for you. are going to be facing these problems. they said that theyhink that is the way it should be. we should have to pay more and began to make ourselves more secure. that is why, you know, when you talk about r&d, your expenses are like research and development for a pharmaceutical company, and that is why i think it is wrong of you to say that. i think that is a cost that you could absorb so easily.
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and still do very well. but not once during this hearing have i heard any semblance of a willingness to share unless every other company also has to, a way of building of the defense that it can't happen. i haven't heard anybody talk about what they are doing, what they would be willing do to share in the budget problem and the total concept of what keeps america together. that is a sense of fairness. everybody has to give something up. do any of you have any things that don't add on the so long as every other company does it, too? things you can just stop doing, and breaks that you will allow
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-- that you now get tthe u.n. to get as a way of helping? >> i very much appreciate the comments that you're making. i can only represent how we as a company field. we feel likwe are constrained and restricted the from our opportunities. we feel we are edible industry that provides the energy that has developed this country into what it has in the standard of living. we feel we are part of the energy solution for this country. we are constrained. we're ready to invest and do far more. it is not a question of looking for incentives. put us back to work. give us access and let us start drilling. but our people back to work.
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>> can i just say that we feel constrained. we can't do what we want to do. maybe you are right and maybe you are wrong. i think you are wrong. a great bulk of our people and our country that are suffering in ways that you have no idea of, just don't understand. and they think that is sad. >> it opens up another subject, i just want an answer from my own information. i have not discussed this at any great length. but i have said previously that you would like more access. that whatever it is, there are more access permits.
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as he said, mobil. this is the question that i have, there are millions of acres of leases that you are not utilizing. i am just curioushat response that, if there is one. it does, quite frequently, that question. >> i will take you back to alaska and try to put this in perspective. i will put it in terms of leases. we are one of the top three. sometimes the second or third largest operator in the gulf of mexico. about 35% of those are producing. in some stage of a valuation, it is cominforth. we have over 400 leases or that are sitting waiting for permission to move forward, just to put that question forward.
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>> i can comment on lead times. a lot have been said about leases that are in development. we just made a final investment decision this year. it was seven and half a billion dollars of commitment. we made the expectation that we would get permits, those leases were first issued in the late 90' we did not know how to explore or develop in that deep water. technology has advanced. we have begun exploratory drilling. that we have made decision that will result in production in 2014. there is a long lead time in the offshore area where most of the undeveloped places are today. we're having trouble getting permitting a on the leases that we have, keeping those leases in active, and when we talk about the opportunity that is there,
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we have to talk about timely issuance of permits so that we can continue to explore. the other is making sure that the continental shelf is fully explored. and you have made estimates that you could create companies twice the size of chevron with the resources that we haven't developed yet. we won't know what we have until we explore those areas. that is the opportunity we are talking about. >> the second question, the public reports, i think, a think it was 2010, about 60% of the after-tax profits were invested with stock repurchase or dividends and so forth, about 40% would be annvestment, i don't know. it seems a lot of that money is going back to shareholders. the money you're making is a
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stock repurchase. why isn't more of that going into investment? how does the percentage of compare with other industries? >> we earned about $30 billion. we invested $32 billion. we invested more than we earn. with that cash flow, we pay all of our expenses, the salary wages, the benefits. we pay taxes, we find opportunities. and what is left over, wpay the dividend. and we return that through share repurchases. they invested it with us, they entrusted us with our savings to grow it and give them some and come back. i know is a novel thought here in washington.
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>> i appreciate what he said. i have a chart here. for 2010. it says that stock repurchases as a% of profit was 70%. the tried a budget anything, just look at it. i don't think they are consistent with the numbers i just gave you. >> 30 billion in profits, my recollection is that we return $19 billion to shareholders last year. >> i think if the public sees this, they will think, it would be better for that money to go
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back to more jobs, more investment, so forth. >> give us something to work on. >> how about trade? >> i don't think i came to negotiate a trade with you, senator. >> i would offer if they behave 51 $6 billion to shareholders, ultimately, those dividends are taxed and the government receives revenue. when we do, our stock has gone up 30 or $40. that generates tax revenue for the government as well. and the money has been reinvested where the investor thinks it is appropriate.
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>> yesterday, and the wall street journal the former democratic congressman harold ford, a good friend of mine asked whether gas prices are climbing the with any elected official call for new taxes on energy. the thought was a pretty interesting question coming from a democrat. in your testimony, you say tt changing important tax provision outside the context of corporate tax reform would achieve one unmistakable outcome. it would restrain domestic development and reduce tax revenues at a time when they are most needed. would you folks please elaborate on t negative economic consequences of the proposed selective tax increases that
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they would impose only on your industry and not the others? >> to the extent that taxes are increased, it impacts the economic evaluations that we go through. we spend les on deepwater development. as to the extent of more onerous tax provisions are placed on us. >> anybody else care to comment? or do you agree? >> this business came up today. generally, all u.s.-based companies are entitled to a foreign tax credit based on foreign taxes at they paid. it would be really wise to go to a territorial system.
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but our system is a screw the system where we are constantly trying to find ways to resolve some of these difficulties when ernie's money overseas. let me go through this. generally, all u.s.-based companies are entitled to foreign taxes that they pay. foreign based multinationals do not claim that u.s. foreign tax credit. it is essential to most american companies with global operations. the capacity rules in place determine to what extent a payment from u.s. company is equivalent to an income tax and eligible for the foreign tax credits. and to what extent such payment is for systemic -- such as
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economic benefits such as for the right to operate a gambling casino and are not eligible for foreign tax credits. the first question is for anyone on the panel the clearest -- appears to answer. is it true that it would be harmful to american based oil companies, but the repeal would be a negligible effect of foreign based companies? the second question is, to the best of my knowledge, there only a significant benefit to two sectors of the united states. in any of you confirm that that is the case that the recent proposal would still allow the gambling casinos like mgm resort, caesars entertainment, or gaming in the las vegas sands to claim the benefit of dual capacity rules and you would not be able to.
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let me just make sure that i understand correctly. it seems to me it wouldarm american oil companies but would not harm foreign oil companies or gambling casinos. i'm not for harmi those. about the know much gambling business, but i can tell you that when tax rates exceed the u.s. rate overseas, if we don't have a dual capacity tax treatment, will be ceding to foreign rivals. even europea companies, it is very important. the internal revenue service is willing to distinguish between royalties and tax benefits. there is very little that has been studied more than this subject. it may have been difficult a few years ago. but there is an abundant rule. is important that we be allowed to take tax credits where we
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have already pai taxes overseas. >> i would echo his comments that it would have a devastating impact on our ability to compete overseas. this is one topic where you'll not find the companies' alliance because the competitors are at the table and they operate under a territorial system. we would lose competitiveness and relative to them. and an already very crowded and enormous competitive world we find ourselves, the space because of the growing presence of the national oil companies which already come to the game with other advantages that we don't have, we have to of setback by finding ways to out compete them. >> you are competing with
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national oil companies. national and international oil companies. let me finish with this comment. if i get you correctly, what you're saying is that it would be very unfair to pass this type of legislation because it would be selective taxation against your industry the other industries in this country can benefit from? and that doesn't seem right to you as far as i can see. if i am summarizing this property -- properly, you can surely correctly. it would be an unfair approach and will make you less competitive if that happened. it would cost jobs, and most importantly of all, it would cost real jobs.
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you have put a lot of people to work. people come to congress asking for help. the oil business has really helped alaska over the years. you have to put people to work, and frankly, if i understand this hearing and what you are all saying, it would be unfair. and probably -- not probably. the bottom line is, and let us think any of you will disagree with this, it will not bring down gas at the pump one penny. in fact, it is likely to go ahead because of the selective taxation approach. >> this concludes the hearing. i will and where i began, namely
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that we have got a fiscal problem on our hands. we have to get the deficit down. we have to make choices and none of them are easy. twice a week ago over to the blair hou to meet with the vice president and members of the senate. home secretary geithner, gene sperling, going dallas trying to figure out how we do this -- and going down a list to figure out how we do this. the conservation programs, which is food stamps. this is not fun stuff. keep that in mind, and you go back to the daily work, we can
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contribute here, too. we are in this together. everyone clearly once more jobs, more growth. and incentives to invest in the united states. more american investors, we find incentives to do that. the other measures encourage investment. this hearing is concluded. i am not totally convincedhat these provisions had that much, or if they are taken away, given the huge profit margin because the price of oil is so high. this is not going to change the
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price at the gasoline pump. what i see, i grant you, we have to develop an energy policy. there is a lot that we have to do. >> one last comment. i know that you are sincere enough to do that. my problem is, there is not a real good reason for raising this. if they raise these taxes, congress will spend every dime. have the capacity right now where a film that might work better, it would cause this to
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go down. >> i will disagree, we have to give these deficits down. so we don't come up against the death led so we can't be faulted. we have to get the deficits down. we look good because we have to do it. hearing concluded. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011]
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>> in this conversation is happening at this time in a highly political debate. when gas prices are so high. is there any truth at all to the charges made a you guys are out of touch with the american people? >> the results of hearings of that to me is i would love to invite some of the members have participated today to get better in touch with what we're actually doing.
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with people that represent every element of society involved in these companies. the real opportunity to have an impact on the country, we talked today about certain tax elements and certain billions of dollars associated with the tax elements. we think about the benefits, you're talking about hundreds of billions of dollars is not ultimately trillions of dollars into the federal treasury. it is a cometely different conversation. >> what i said was that i was very cautiously optimistic. the fact that we have had a coordinated meeting with a across agencies, that is a positive thing is that we've been missing the last couple of years. of the means progress.
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>> what do you think is the real problem here? >> there are lots of individual elemts. i could've said the pact that we could meet the air emissions for drilling and kept us from drilling in 2011. the bigger issue overall is the political will to make this happen. that is the bigger issue. there are lots of small reasons. the right way for the country, it would not get done. >> a year that point? >> the term cautiously optimistic is an important statemt. we want to move forward with this development. it is the better thing for the country. that is really our intent to try to make his goal.
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>> what about your reaction? >> is helpful to open the conversation. there is even an opportunity to say there is a bigger picture here that makes a lot more deference and impact to the u.s. and then talking about a few incentives. you can impact the economy and the federal treasury and deficit over time. -- isk we're building good for a bit of humor, but we need to kill her. >> you know you're going to come here and they're going to grow you and put you on the spot. >> we believe in the american gornmental process and this is
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part of participating in that. it is supplemented by individual meetings with the members to make theoints that we want to make, something that we will always partipate in. >> to the point about the debates of the repealing of incentives leading to higher gasoline pris. can you make the case that would lead to higher gasoline prices. >> it is hard to make definitive statements around prices. part of the conversation was about all of the elements. one of the answers was that oil is flowing in a relatively short time to somewhere in the $30 a bael range. there are so many factors, you can't said definitive impact. you heard the economics. this stage -- this is a globally competitive business. that means less domestic
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production, and regardless of how that directly and immediately affect the price of gas, has those other unintended consequences with significant benefits like money into the federal treasury. it is much more valuable to make the production than to sqeze a little bit more. >> is there a possibility if the taxes were changed the the money would be passed along to the consumer any way? >> and the more likely choice is that money shifts and other parts of the world. that is the way this business works. we make those decisions in the 25 per $30 billion that we spend every year. we make those decisions on a weekly basis. >> you mentioned the prices.
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the think his relatives are behind that. >> we don't have any reason to think there is anything negative going on. if that is the orientation of the question. those that buy supplies of oil going forward and those in the trading market are evaluating all of the factors that are there which are not only the shearer supply and demand fundamentals, but the suppl demand fundamentals into the future as economies start to recover. i say immediate disruptions in the north african and middle east countries as we speak, you see the impact of the tragedy of japan. all the roles and to what is the price going to be in the future. i mentioned the airlines and my comment earlier. the business that was to get assurance about what it will pay into the future will buy into those markets.
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that is a fundamental positive necessary impact associated [unintelligible] any basis to say that. what i mentioned in the testimony, this has come up many times before. we have looked into this very deeply before. there is a negative impact here or something out of proportion. >> one more question. >> your industry is making a lot of profit. oil prices are high. how do you disconnect the for the consumer? >> let's talk about the u.s. business.
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this was a hearing largely about the u.s.. when you think about the numbers, all of this is about profit. we just did a rough average of our income and investment over the last five years. it is something like $3 billion a year profit. higher prices, it allows us to invest more that has the cycle of building more supply. and all the other benefits that go back to the consumer in terms of more jobs. and an opportunity to reducehe deficit. as the picture that we were trying to drive today. >> we have to take off. >> i'll be here to take your questions.
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[captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011] >> this week, this senate is
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expected to consider a democratic bill and the tech specs for the five largest oil companies. it has been widely reported that 90 measures will likely attract the 60 votes required for energy policy. tuesday will be an executive session for the nomination of a judge for the u.s. circuit court. later today, former house speaker newt gingrich who officially announced his presidential bid earlier in the week. we will show you his speech from friday night to georgia republicans. he spoke of the state party's annual convention in macon. that is at 6:30 p.m. and 90 p.m. eastern and pacific here on c- span. gingrich and i am announcing my candidacy for president of the united states
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because i believe we can return america to hope and opportunity. >> with a field of republican presidential hopefuls beginning to take shape, a look at of them on line with the c-span video library current surge, watch, clip, and share with everything we have covered since 1987. it is what you want when you want. >> the social security and medicare fund trustees police there no report on the fiscal condition of both federal programs. you'll hear from treasury secretary timothy geithner who is the managing trustee of the fund as well as other trustees, including health and human services secretary kathleen sebelius. this is 35 minutes.
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>> i want to begin by welcoming my fellow trustees and their two new trustees. welcome. it is nice to have you with us. i also want to acknowledge the chief actuaries and thank them and their staff for their excellent work. sufficient resoces to meet their obligations for at least the next decade, it is important that we put in place reforms to strengthen these programs. social security and medicare benefits are secure today but reforms will be needed so that they will be there for current and future retirees.
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the social security program has dedicated resources that will cover benefits for the next 25 years but in the year 2036, one year earlier than was projected in last year's report, the social security trust fund will exhaust its assets and income, incoming revenues will be insufficient to maintain payment of full benefits. and due to technical changes in the economi assumptions underlying the projections, medicare's hospital insuranc trust fund will exhaust its assets in 2024, which is five years earlier than was projected in last year's report. the medicare report illustrates once again the importance of the reforms in the affordable care act which will significantly strengthen medicare's finances and extend the life of the medicare trust fund. the trustees reports under score the need to act sooner rather than later to make reforms to these entitlement
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ograms. last year of course the president and congress took a timely first step by enacting the most significant entitlement reforms in decades but we have to go beyond the affordable care act and identify additional reforms. americans are living longer and health care costs are continng to rise. if we do not do more to contain the rate of growth in health care costs, then our commitments will become unsustainable. so in light of these reality, the president, as you know has proposed a balanced comprehensive framework for deficit reduction. and this framework includes health care reforms that will generate substantial additional savings on top of those that will be generated by the affordable care act. now of course we should not wait for the trust funds to be exhausted to make the reforms necessary to protect our current and future retirees. larger, more difficult adjustments will be necessary if we delay reform
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and by making reforms soon that are phased in overtime, we will help reduce uncertainty about future benefits. noas the president said, social security and medicare define and reflect the values of america. they are commitmes that make our society more fair and more just. we have kept those commitments for generations but our responsibility is to make the reforms necessary to allow us to maintain those commitments for the future. now on a slightly separate note, on monday, may 16th, just three days from now, the united states will reach the debt limit set by congress and because congress has not yet acted to raise the limit, we have now set in motion a series of extraordinary measures that will give congress some additional time to raise the debtamt. -- limit. i want to encourage congress
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to move as quickly as possible so all americans will remain confident that the the united states of america will meet all its obligations, not just our interest payments, but also our commitments to our seniors. i want to return the floor now to my colleague and fellow trustee, secretary kathleen sebelius. >> thank you, secretary geithner and i think that, we have hrd in today's medicare trustee report that there's no question we have strengthened medicare but there is still work to be done as the secretary has already said. from day one the obama administration has made protecting seniors for today and tomorrow a top priority. and that's why we implemented a series of reforms over the last two years including those in the affordable care act signed into law just a little over
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a year ago which have already produced significant savings for the medicare spital insurance program. now without these important steps the hospital insurance trust fund would have been exhausted in 2016, just five years from now. instead, today's report found that the hospital insurance trust fund will remain solvent until 2024. over the next 75 years, medicare costs on average ar projected to be 25% lower due to the new law. this is happening even as we're adding important new benefits to help people with medicare stay healthy and to reduce the cost of prescription drugs. this year the projected exhaustion date of the medicare hospital insurance trust fund did move forward from last year's projections. this is due in large part to lower payroll tax revenues as a result of the slower than expected economic recovery. it's important to note this
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is exactly what we've seen in previous recessions. and that, having the affordable care act in place is the main reason that those projections are not worse. indeed what the trustee's report shows that the affordable care act has put medicare on a much more sustainable path. because of the law, medicare costs per enrollee are now expected to grow more slowly than gdp per capita, through 2019 after growing much faster than gdp per capita for the last four decades. still the report shows we have work left to do. every day, nearly 48 million people our parents, grandparents, neighbors and friends rely on medicare for the medical treatments and prescription drugs they need to stay healthy. to keep medicare strong for them and for their children and grandchildren we need to continue to look for opportunity to slow medicare costs by improving care and
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reducing waste and fraud. we recently launched the partnership for patients, an existing effort that has brought together hospitals, doctors, nurses employers, patient advocates and others, to improve the quality and safety of care for all americans. if reach the goals we have set for just this one program, medicare will save another $10 billion over the next three years and as much as $50 billion over the next 10 years, as well as saving 60,000 lives. and the president's fiscal framework would build on the affordable care act to save medicare another $200 billion over the next 10 years. what we can't do is follow the republican plan to turn medicare into a voucher program and shift the cost to seniors. under that an a typical 65-year-old who becomes eligible for medicare, would pay an extra $6400 a year out of their own pockets for
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health care. even worse, the plan does nothing to address the main factor driving up medicare spending and other health care spending, are which is the underlying growth in health care costs. medicare is a promise to all americans that if you work hard, you can retire knowing that your medical bills won't force you into bankruptcy. while our work is not finished, today's report shows that the steps we've taken in the last two years have put medicare on a more ten sustainable course for the future. i would like to now turn over the podium to our colleague, secretary hilda solis. >> good afternoon and thank you for being here today. today we've heard much about the long-term financial outlook of social security and medicare. undoubtedly challenges remain that threaten both the solvency of these programs and the retirement security of many american workers and beneficiaries
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who depend on these benefits. program costs are projected to increa significantly through 2035 for mainly two reasons, the rapid increase in reirrelevant toos of the baby boomer generations and lower birthrates of more recent generations that result in slower growth of the labor force and gdp. furthermore, people are living longer, so while costs of these programs are rising it's critical to recognize contributions of demographic. in aition slowing the growth in projected long range cost of medicare will depend largely on program changes under the affordable care act which will take effect in the coming years. this highlights the importance of making every effort to ensure that the affordable care act is successfully implemented. the affordable care act extend health care coverage for tens of millions of people who would otherwise not have access to health insurance. and to create a more efficient health care system, the legislation will rein in
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sts even as we expand and promote quality, not just for medicare beneficiaries but for everyone. while trust fund income and earnings are projected to cover costs for a few year the trust fund assets will ultimate be used to pay for benefits, benefits like the social security disability insurance, the di trust funds, which are projected to be exhausted in 2018. this is especially important as the unemployment rate remains unacceptably high. loss wage income has and continues to be devastating for working families across this country but it also erodes the payroll tax base, the revenues from which are needed to pay current program benefits. the department of labor is playing a critical role in getting the country back to work and has put in place many policies and programs that are providing opportunities for americans to succeed, keeping our workers safe and making sure that working families keep what they earn. these efforts aren't only
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critical it revitalizing the middle class, they create more revenu for social security and medicare. for instance, we vrl a program called job corp it is a free education and training program that helps young people earn a high school diploma or ged to find or keep a good job. the job corps program provides low income youth with skills they need to succeed in career and in life. there is no question that young workers who join the labor market through job corps and other training initiatives fundamentally strengthen social security and medicare programs. we're also working hard to ckle worker misclassificion. when workers are properly classified they receive the pay they earn and deserve and for the work that they do and social security and medicare services receive the appropriate taxes that are paid on their behalf. additionally we're also creating opportunities for our workforce development system to partner with state and community-based organizations, businesses
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serving associations and economic development agencies to expand employment opportunities for people with disabilities. let me be clear. people with disabilities can and want to work. there's a growing body of evidence that proves that workers with disabilities meet and exceed the job performance of coworkers without them. yet the talent, those with disabilities bring to the workplace, continues to be undervalued. thus, their labor force participation remains lower and their unemployment rate remains very high. increasing the employment of people with disabilities is not only good for them, it's good for social security and for medicare and it's critical to the economic prosperity of our country. the social security and medicare programs provide an important safety net for millions of retired workers and beneficiaries, many of which are lower income and who depend on these benefits to survive. we must act and we must act swiftly to provide smart, viable solutions that will
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fill the gap between income andosts of these programs. the well-being of our people in the future and prosperity of our country depend on it. thank you again for being here today. and i'd like to next introduce commissioner esther. >> like to begin by saying that in my opinion this year's report is a betr document because of the collegial work of our new public trustees, dr. rieschour and dr. blah house. we went three years without public trustees and we need perspective that we bring. public debate about social security has focused on retirement benefits. from a technical point of view as president obama has mentioned many times, legislative change is relatively straight forward. if congress has the will to
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make meaningful changes they can do so with high degree of confidence that the program will perform as predicted decades into the future. this year's report is typical. there are no big swings relating to the oasdi fund. our disability programs are far more complex though than our retirement programs. there is a long history of well intended reforms cause intended consequences. and i think the risk of that result is greater than in the past. congress hasllowed ssa's demonstration authority to lapse. it has not asked gao to do the type of research that would support serious reforms. disability legislation predicated on anecdotes or sound bites would be a disservice to beneficiaries and taxpayers. one area that desperately needs reform and want to echo secretary solis here whereby partisan support has been very possible in the
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past is area of work incentives for the disabled. historically congress has been frustrated by low numbers of people who return to work but it has layered new legislation on top of old without revisiting the old and made the problem worse rher than better. the complexity of the statutes, deters many beneficiaries who are inclined to try work. one and indicator of this problem is a congress in recent years has appropriated up to $23 million annually just for contractors to plain these complexities to our beneficiaries. it is time for congress to review all statutory work incentives from scratch and ask the simple question, is this the best we can do? we need clear, significant incentives if we want those people who can return to work to do so. the president this year in his budget sent to congress our work incentive simplification prorofl or
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wisp, with which would be a good start for bipartisan progress. i urge the house and sena to review this proposed legislation quickly and schedule hearings on this topic as soon as possible this year. thank you and i willurn now to dr. blahouse. >> well, i'd like to begin, first of all, by thanking secretary geithner for the outstanding work that his team at treasury did in managing this process. adding my thanks to the terrific actuaries at cms and ssa for the outstanding work that they do. thanking secretary sebelius, secretary solis and commissioner astrue as well for terrific work their staffs did throughout the process. i want to most of all thank, dr. riesch 135is er fellow
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trustee ideal partner in very pressureable experience for me. we report each year on. two programs, social security and medicare. medicare i by far the most complex, difficult to project of the two programs. social security is a much easier challenge to grasp intellectually. so i will speak about social security and leave medicare for dr. rieschuor. the story in social security, is pretty straightforward. costs are growing in the program at a pretty rap pace and will do so until 2030s as consequence of baby boomers entering retirement. by our projections cost of payingenefits in 25 will be 17% of the taxable wages that workers earn and total costs will amount to 6.2% of national gdp. before the baby boomers enter retirement in 2007 report, the last one before the boomers began to hit the
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rolls, these figures were 11 1/2% of taxable payroll and 4.2% of gdp respectfully. you could see we'll have substantial continuing cost growth in the social security program to the point where mid 2030s, costs will be roughly 50% larger relative to the size of the economy compared to where they were before the baby boomers enter retirement. that much we have long-anticipated. we knew that was coming and we knew it would place financial strains on social security but unfortunately at the same time as the boomers began to enter the retirement rolls we experienced a economic downturn. and so some of these fiscal pressures have arrived earlier than previously anticipated. in 2010 for the first time since the mid 1980s incoming tax revenue began to fall behind outgoing benefit obligations. in this year's report we projt that these deficits in social security which began last year will be a permanent feature of program
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finances going forward unless and until legislative correct are enacted. now because of interest payments from the general fund to the trust funds, the nominal value of the trust funds continues to rise and we project that will continue to be the case through the early 2020s. there are some important caveats to be made about that. one is that in terms of financing benefits, the nominal value of a trust funts is probably not quite as importance as duration of benefits the trust funds can finance and presently the costs of paying annual benefits is rising at a more rapid rate than the nominal value of trust funds. so-called trust fund ratio which measures the amount of time full benefits can be paid by the trust funds peaked in 2008. is declining this year and will continue to decline going forward. the other caveat i issue echoes an important point made by secretary solis and
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commissioner astrue we have more pressing challenges on the disability side of the equation than we have on the retirement side of equation. disabilityund is declining in nominal terms and we project exhaustion of the disability fund by 2018. in this year's report we do not change our view of the long-term fundamentals after affecting social security. none of the long-term assumptions, basic economic or demographic assumptions have been changed relative to last year's report. what we have done we updated data for more recent information about longevity trend, trends in immigration, and economic performance. of these the most important to the long-term projections is a change in longevity experience. we'll find that both in the years 2007 through 2010 and goin forward, we expect greater advances in longevity than we're anticipated in the 2010 trustees report. indeed much of this is already the books and has already occurred. as commissioner astrue
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indicated we do not have a qualitative change this year in social security's long-term out look. at the same time you will see a significant change in the 75-year acutarial balance for social security. last year this was measured at 1.92% of taxable payroll over 75 years. this year's report has 2.22% of taxable payroll. that is a 30 basis point change. we don't tend to have wild swings in social security finances as commissioner astrue said but this is actually the largest single year deterioration in the 75-year balance we've seen along with a comparable change in the 2009 report since the 1994 social security report. in the end i would just say to all of you, if, there are any of you who don't feel like struggling through the entirety of the medicare and social security trustees reports i would commend to you the messages written collectively by the six trustees and by the two public trustees. they echo the appointments that have been made earlier
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here today that the earlier we act to strengthen these programs the better off we will be. time is important in the sense that the longer we wait the more our options narrow. of course in the trustees report we present the illustrative nightmare scenario which shows that at the point of trust fund exhaustion in social security we would be oking at either a 23% benefit reduction or an increase in the payroll tax rate to the 16.4%. but if we act earlier, we will not have to face consequences of this magnitude and indeed we'll be able to preferentially look after interest of vulnerable low income americans an those alread in retirement. i' been heartened to see people on both sides of the aisle their intention to do just that. with that i will yield to my fellow trustee. thank you.
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>> good afternoon. i'm pleased to be here and participate in this process with my fellow trustees. i want to begin by just making a few comments about the process. as you've been told by several of the other speakers before dr. blah house and i -- blahouse. asmed our responsibility in september of this year, the two public trustee positions had been vacant for three years. so there was no public trustee input to the 2008, 2009, or 2010 report. as major responsibility of the public trustees is to assure that the american people that the fnancial and acutarial analyses that are contained in these reports are done in a subjective of a manner as possible using the best available data and estimates and employing the most appropriate methodologis. having been emersed in this
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process now for a bit over six months, dr. blahouse and i feel that there is no doubt this is the case. one can not be impressed by the dedication and expertise by the actuaries and their staff. the departmental staffs that support the ex officio trustees and the staffs of the social security administration. we participated in what was an open, robust and vibrant discussion of the numerous issues that have to be resolved each year as these reports are developed as e-mails flown back and forth, sometimes late at night, we've seen all of the participants have been striving to pruce the most accurate possible projections of what our inherently uncertain numbers. we've also been encouraged by the collective effort that has been made to make these reports more
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transparent. and the thrust that was spearheaded by commissioner astrue to improve the aspirational clarity of what tends to be rather dense material. i will turn and make a few comments that relate in a very broadway to the content of these reports. first, i add my voice to what already is a chorus that is emphasized that under current law these vitally important programs are on, are on unsustainable paths. the sooner policymakers address this problem, the less disruptive and, the unavoidable adjustments will be and the greater the possibility for adjusting in a way that is balanced, equitable and measured. well the bottom line message of the 2011 reports are no different from those of previous reports. one can not but be struck by
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the uncertainty that surrounds the environment in ich both social security and medicare operate. while our economy is improving steadily, we live in a very uncertain world, one in which economic developments in europe, political instability in the middle east, or changed national priorities in asia can have profound repercussions on our economy, our employment, our growth, and these programs. within our borders we are in the midst of a period of unprecedented innovation in the capacity of medicine and unprecedented amount of experimentation in the w we deliver and pay for health care. these changes are being spurred by many efforts in the private sector and by profound changes in public policy, most notably the affordable care act. because of this turbulent environment, unavoidably
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there is wide confidence ban around around the estimates for medicare cost for the short and intermediate run, not to mention the much longer time period. given this reality it is important that the central tendency projections we produce be ones that represent a sustainable future which under the current law is not the case. i want to close by sing that both, on my part and on dr. blahouse's part we look forward to working with the actuary, other trustees and their staffs on future reports and hopefully on policy changes that eventually will put these two programs on a sustainable path. thank you. >> thank you, dr. reischauer. we'll take a couple questions. i ask you leave any technical questions to the background briefing we will
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do after the secretaries and trustees depart. we'll take a couple. up front? >> this is for secretary sebelius. you mentioned some affects of the affordable care act on medicare. besides the 500 billion that was cut from medicare advantage, what other specific programs are affecting that long-term cost? if you could just explain some of them? >> first of all there wasn't 500 billionut from medicare advantage. that is a portion of the reduction in cost increases over time. certainly there are some significant delivery system reforms that are just getting underway, we anticipate significant savings. the accountable care organization structure, the new partnership fo patients which i just mentioned which has some cost savings. we have new tools for going
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after fraud, waste and abuse last year alone produced about $4 billion back into the trust fund. we produced a repo yesterday that is available in more detail which, analyzes about $120 billion worth of savings over the next five years, which are part of the early implementation of the aca and that can give you considerably more detail. >> in the back. >> could you explain the distinction between social security being in deficit and the trust funds being exhausted? is it slightly deptive to talk about social security running a deficit currently considering it takes in less than it pays out until 2036? >> [inaudible]. can you hear me? good. i'm glad you asked that question. actually in last year's
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press conference stressed the importance of the media understanding the term exhaustion which means something different to the actuaries than it does to the average person and that what exhaustion in 2036 this year means that we'll have money to pay a little more than 3/4 of benefits with no other legislative changes. now that's not good. we need to have the congress step up and make changes so that that's not the outcome but that's radically different from, it is totally bankrupt, there's nothing there at all and, is a constant irritation for me picking up the news clips and seeing how often the media reports that exhaustion figure as if there would be no money left in the trust fund. so bless you for asking that question. in terms of the cash flow, i have somewhat similar response. we have moved to, from very
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slightly positive in several of the coming years to very slightly negative. it is a rounding error in terms of its significance in my opinion and has no significance in terms of the long-term future of social security. again as i stressed last year, what matters in t long run is the exhaustion date and the percentage of benefits we can pay after exhaustion, whether we are, in terms of pnts of view of social security, and the stability of the system, there's really, these tiny swings in the grand scheme of things from one year to another, from slightly cash flow positive to slightly cash flow negative, in my opinion, are not significant for the long-term future of the program. >> we'll go right here in the middle. yep. >> the disability trust fund is a much worse shape than the social security trust
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fund. both you and secretary solis talked about incentives for returning people to the workforce. in a time of chronic unemployment where a lot of ople use the disability system as pseudo unemployment insurance system, what are some of those incentives? >> i think the most important thing is to, to simplify it. if you work through what someone on the rolls who has to, decided to try to go back to work, has to try to master, what the ramifications are, it's extremely complicated and we know from experience that the difficulty of doing it, and the fear that if they make a mistake thathey might forfeit, usually not the cash benefits that matter. it is medicare and medicaid benefits that matter. that is a very significant deterrent. simplifying the program and making it clear what happens when you try to go back to work, if you fail what happens and what happens to your medical benefits i think that's a enormously
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important. and i don't tnk you could take, certainly i couldn't sit down and explain it to you and get it exactly right in all the technical glory. and it's not reasonableo expect the public to understand that. so i think the most important thing, go back from scratch. realize that a lot of these well-intentioned statutes from the past are the in conflict with each other and they're detering people from going back to work. so what we've done in the wisp prosal is giv congress a cost neutral exple of how that might be done so that the significantly more simple and that the ramifications for health benefits in particular are going to be exponentially clearer to people. and i think particularly as the econo improves that will result in a significant amount of return to work. but let me add one qualification to that because i've had this conversation recently with several members of the media.
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a significant portion of the disability, disabled population is unreasonable to expect them to go back to work. that's why we have the program in the first place. it is significantly lss than half. for those who can go back to work, we should do it because it promotes dignity. there are small savings to the public, but it will not significantly change the solvency of the disability fund even if we are successful at the high end of your reasonable expectations in and of itself. the work incentive programs are not going to change the solvency picture for the fund. >> thanks very much, everybody. thanks to our trustees.
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>> monday, on c-span 3, a discussion on the future medicare and the findings of this year's medicare trustees' report. the american enterprise institute host this live event at 9:15 a.m. eastern on c-span 3. a little later, the chief actuary of the social security administration talks about the economy's impact on social security and what can be done to ensure the program's long-term viability. this is hosted by the nonprofit national academy of social insurance. live coverage at 2:00 p.m. eastern on c-span 3.
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>> coming up, president obama's speech on immigration. after that, i senate judiciary some committee about the at&t and t-mobile proposed merger. later, on "newsmakers" senator just bingaman on congressional efforts to address energy issues. >> newt gingrich and i am announcing my candidacy for president of the united states because i believe we can return america to hope and opportunity. >> with a feel the provincial hopeful beginning to take shape, follow the candida's announcements and speeches on the road to do what us and look back at their careers on my -- all the candidates announcements and speeches on the road to the white house and look back at their careers on >> in el paso texas last week,
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president obama called on congress to pass comprehensive immigration reform legislation. this is about 35 minutes. yyyñç÷ç÷s÷s÷s÷s÷s÷s÷s÷s÷c÷c÷? >> hello, el paso. it is wonderful to be back with you in the lone star state. [cheers] everything is bigger in texas. [cheers] ÷÷÷÷÷÷÷÷ññññññññ
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i wanted to give a big policy speech outside on a very hot day. [cheers] i hope everybody's wearing sunscreen. you say you live here. you do not needed. [cheers] it is a great honor to be here. i want to express my appreciation for you taking the time not to be here today. [cheers and applause] thank you. about a week ago, i delivered the commencement address at miami-dade community college which is one of the most diverse schools in the nation. the graduates were proud that their class could claim heritage from 181 countries around the world -- 181
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countries. [applause] many of the students were immigrants themselves, coming to america with little more than a dream of their parents and the clothes on their backs. a handful had discovered that in adolescence or young adults would the there were undocumented. they earned those diplomas. at the ceremony, 181 flights, one for every nation that was represented, was marched across the stage. each one was applauded by graduates and relatives to ties -- with ties to those countries. when the haitian flag went by, all of the haitian american kids shouted out. when a guatemalan flag went by, all of the kids of formal and
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heritage shouted out. when the iranian flag went by, i think one kid shouted out. -- when the ukrainian flag went by, i think when to shut out. [laughter] this was miami. it had been in chicago, there would have been more. then the last flight, the american flag came into view and everyone in the room erupted in applause. everybody cheered. [cheers and applause] ññññññññññññññññ so yes, some of them and their parents and grandparents had come from all of the globe. but it was to the found opportunity. it was here that they had a chance to contribute to the nation that is their home. and it was a reminder of a simple idea as old as america
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itself. e pluribus unum, out of many one. those willing to brace america's ideals and america's freedoms, that is why millions of people, ancestors to most of us, braved hardship and they have risk to come here to worship and started business and live their lives in peace and prosperity. the asian immigrants who made their way to california's angel island, the germans and scandinavia's who settled across midwest, the waves of irish polish and russian and jewish immigrants railings to catch their first glimpse of
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liberty. this flow of emigrants has this country stronger and more prosperous. [cheers and applause] the genius of the of isaac asimov, the industry's forged by . whether the but immigration, i about the naturalization ceremony that we have held that house for members of military. nothing could be more inspired. even though they were not yet they joined our women try their best to serve. did one event at the white house and a young man named granger michaels from papua new
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guinea, a marine who had been deployed to iraq three times -- you know what he said of the becoming an american citizen? i might as well. i love this country already. that is all he said. marines and not big on speeches. [laughter] there was a woman named carla raised in to the united states shortly after 9/11 and joined the navy. she said, " i take pride in our flag and our history that we write day-by-day." that is the promise of this country, that anyone can write next chapter in our story. it does not matter where you come from. it does not matter -- [cheers and applause] matter where you from and it does not matter like.
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it does the matter what fate you worship. that you believe ideals of which we were founded, that you believe that equal, owith new -- with these inalienable rights. [cheers] all those deserved the freedom of pursuit of happiness. you can become american. is what makes this country great, that image is all of us. -- that gingrich is all this. at the same time, we are here at the -- that enriches all of us. the same time, we're at today -- cheers and applause]
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we are here at the border because we realize that we are also a nation of laws. of allowed to come into this country. fear directed towards newcomers, especially in hard . because these issues touched deeply on what we believe, deeply on our are and be an america, this elicits strong emotions. that is one reason it has been difficult to reform our immigration system. with an issue this complex, it raises such strong feelings. it is easier for politicians to next election. there is always a next election.
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blame politics and a lot of ugly rhetoric around . we have seen good faith efforts parties. by the way, i just noticed, have choose, if down, feel free. there is no rule about having to am -- [cheers and applause] yes. have seen leaders of both to work on this get usual washington games. seen the consequences of the kids of inaction.
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today, there are estimated 11 undocumented immigrants here in the united states. some crossed the border illegally. others avoid immigration laws by overstaying their visas. regardless of how they came, the these folks are just trying to learn for their families. [cheers and applause] knowledge that cut in front of the line. what is also true that the many illegal immigrants makes a mockery of who are trying to emigrate . also, because undocumented immigrants live in the shadows, vulnerable to unscrupulous businesses that less than minimum wage and cut with health and safety laws, this puts companies who
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rules and americans the minimum overtime or a safe place puts those businesses at a disadvantage. think about it. over the past decade, even hit, middle-class families were by as costs from tuition to groceries to gas. their incomes did not go up with those prices. we're seeing it again with gas prices. one way to strengthen the rip -- in america's to reform the so there is that labor depressing wages for everybody else. i want income for middle-class families to rise again. [cheers and applause]
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i want prosperity in this country to be widely shared. [cheers and applause] i want everybody to be able to that american dream. is why immigration reform is an economic imperative. it is an economic imperative. [applause] and reform will also helped to make america more competitive in the global economy. today, which provides students world with computer at our top universities. [cheers and the applause] but then our laws discourage from using those skills and businesses here in the united states. instead of training and here, we them to create jobs for
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competition. that makes no sense. in a global marketplace, we need we can attract, talent that we can get, stay here and start businesses. those with benefits to all americans. look at intel. at google. yahoo! look at ebay. but those great american companies and all the jobs that they have created. it takes leadership in the high- tech industry. by -- guess who. an immigrant. [cheers and applause] intel next googled to be india. we want those companies and here. [applause]
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bill gates gets this. knows what i am talking about the high-tech industry. he says that the united states more difficult to maintain its competitive bid if it excludes those who are willing and able to compete. so immigration is not just the do. it is smart for our economy. [cheers and applause] it is smart for our economy. and it is for this reason that america demanding that washington finally meet its responsibility solve the immigration problem. the system is broken. is will we finally to do something about it? that is why we are here at the border today. by an
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secretary of the security been working tirelessly on this issue. [cheers and applause] commissioner who is working border issues -- we appreciate him. [cheers and applause] they are doing an outstanding work. years,, one of the greatest impediments to reform about border security. these were legitimate concerns. what was true was the lack of resources at the border combined with the pool of jobs and ill-considered enforcement, all this number living in states. concerns helped unravel a bipartisan coalition that we in the
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united states senate. in the yearsstates senate. borders first has become the common refrain. that is even among those who previously supportive of comprehensive reform. thanks work of those border, we have answered those concerns. under their leadership, we have security beyond what many believed was possible. they wanted more agents of the border. now have more troops on the ground on the southwest border anytime in our history. [applause]
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agents, more as 2004. began under president bush. we have continued it. had a chance to meet some of the agents. of them on horseback who looked pretty tough. we put the agents in. fence. ooing] the fence is now basically complete. then we'd have gone further. intelligence analysts working of the border. we patrol the skies from texas california. partnership mexico to fight the criminal organizations that have both of our countries. [applause]
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here is the point. i want everybody to listen carefully. we have gone above and beyond very that they -- supported a broader as we get serious about enforcement. they asked for, we have done. even though we have answered concerns, i suspect there some trying to move the goalposts on us one time. they said we needed to triple border patrol. will say we need to
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quadruple the border patrol. they may want a higher fence. moat and the moat. they will never be satisfied. understand. that is politics. the measures were . the past 2.5 years, we have seen 31% more drugs from 75% currency, 65% more weapons than ever before. [applause] have stepped up controls -- patrols, apprehensions along the border cut by nearly 40%. people are attempting to illegally.
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that places like paso and other places are dropped by one-third. a paso and other towns along the border are consistently nation. [applause] course, we should not accept crime. always have more work to do. but his progress is important. it is not getting report to don. -- it is not getting reported on. beyond the border, we're going employers who exploit people and break the law. those who are
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here illegally. that is a tough issue. . we are not doing it haphazardly. focusing limited resources crimes. it is not just families and folks looking to scrape together in income. as a result, we've increased the of criminals by 70%. [applause] not to ignore the real of a broken system. recognize that enforcing the law is necessary. we do not relish the pain it causes in the lives of people to get by and getting caught up in the system. it is not just hardened felons
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subject to removal. sometimes it is families who are , students, or eager people with the best of intentions. i talk to advocates, they wish i could bypass congress and change the law myself. that is not how democracy works. is keep the genuine, comprehensive reform. ultimate solution to the problem. what i am committed to doing. [applause] yes, we can. we can do it. we can! the most significant step we secure the borders
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to fix the system as a whole that your people have the incentive to enter legally -- illegally in the first place. this will allow agents to focus threat on both sides of from drug traffickers to or terror. that is where our ffocus should be. the question is whether those in who previously walked away in the name of enforcement come to the work that we've started. [applause] we have to put politics aside. if we do, i am confident we can ground. washington is lagging behind the country on this. there's a growing coalition of a who do to arbiter coming
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on this issue. the harmful broken immigration system for their businesses and communities. need to act. they are democrats and republicans. former martinez former allies security secretary chertoff, leaders like york, ministers, police nation, educators, advocates, labor unions, chambers of commerce, fortune ceo's. one ceo had this to say about reform. is a product of the openness and diversity of the society. immigrants have made america great. in business, education, science, and innovation. that was rupert murdoch, who
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owns fox news. he is an immigrant himself. i do not know if you are familiar with his views, but he obama sticker on his car. with me on this. there is a consensus around fixing what is broken. now we need congress to catch up. we need to come together around the reflects our values a nation of laws and immigrants. the reform must demand that everyone take responsibility. would comprehensive reform look like? the government has a threshold responsibility to secure the law. janet and her folks are doing. [applause] be they exploit .
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are here illegally have a responsibility as well. they broke the law. that means they have to pay taxes. they have to pay a fine. they have to learn english. they have to undergo background lengthy process get in line for legalization. much to ask. fourth, stopping illegal immigration also depends on reforming our outdated system of legal immigration. make it easier for the brightest to stay here, businesses, and create jobs. starts were started by immigrants. to 200,000 jobs in america. glad the jobs are here.
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i want to see more creative in country. we need to provide them the . farms a workers for the workers to earn legal status. [applause] should respect families following the rules. we should reunite them more instead of splitting apart. [applause] system not who break rules, but it punishes those who follow the rules. . often prohibited from visiting the united states.
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husbands and wives may have to years apart. parents cannot see their children. how do not believe the united america should be in separating families. are. better than that. [applause] punishing innocent young people for the actions of their parents. applause] we should stop denying them the earn an education or military. that is why we need to pass the noact. [cheers and applause] usa!
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through the democrats were in control. even though it received a majority of votes in the senate, was blocked when several republicans who previously no. it was a tremendous disappointment to see politics get in the way. when i gave the commencement at dade, it broke my heart a number of the promising bright students who worked so hard are at risk of facing the agony of deportation. kids who grew up in this country. they love this country. they know no other place to call home. the idea that we would punish them makes sense. are -- makes no sense.
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we are better than that. we're going to keep fighting for the dream act. keep up the fight for reform. [applause] that is where you come in. a the issues. we have had a meeting on this at house in recent weeks. we have leaders around the move this forward. this change ultimately has to be by you, the american people. you have to help push for comprehensive reform. you have to identify the steps , areas ground among democrats and republicans to begin to fix what is broken. i am asking you to add your voices to the debate.
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at we need washington to know there a movement to get this done. that is where we can ensure that ahead, we're those wanting to come to thi c the basic american idea that you can make it here if you try. [applause] that is the idea that gave hope hernandez. he is right over there. i want you to think about this story. his parents were migrant farm workers. growing up, he was, too.
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he was born in california. he could just as easily have of been a different time of year. around with the seasons. two of his siblings were born in mexico. lot. he joined his parents picking cucumbers and strawberries. school when they mexico each winter. until he was 12. he was good at math and liked it. same in every school. as it is in english. jose studied hard.
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one day, he was standing in the beets. he heard on a transistor radio that franklin diaz was be an astronaut for nasa. he decided right there that he . jose kept studying. he graduated high school. kept studying and earned an engineering degree. earned a graduate degree. hard. he ended up at a national laboratory helping to develop a kind of digital medical imaging system. a few years later, he found more than 100 miles earth staring out the window of the shuttle discovery. he was remembering the boy in field with the
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america everything is possible. ] paso. that is the american dream. is what we're fighting for. we're fighting for every boy and and potential waiting to be tapped. we're fighting to unlock the promise and hope for their futures and for america's future. why we're going to get this done. that is why i am going to need help. thank you. you. may god bless the united states of america. ♪
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[applause] ♪ [captions copyright national cable satellite corp. 2011] [captioning performed by national captioning institute]
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♪ ♪
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♪ ♪
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>> later today, former house speaker newt gingrich. we will show you his speech from friday night to georgia republicans. he spoke at the annual convention. that is at 6:00 27:30 eastern and pacific here on c-span. -- that is that 6:30 p.m. and 9:30 p.m. eastern here on c-
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span. >> the new directorate has contact information, a district maps, and committee assignments. it has information on the white house, supreme court justices, and governors. order online. >> i am newt gingrich. i am announcing my candidacy for president of the united states because i believe we can return america to hope and opportunity. >> with the field of presidential hopefuls beginning to take shape, follow the announcement and speeches. look back at their careers on line with these c-span video library. it has everything we've covered since 1987. it is what you want, when you wanted. >> the senate judiciary subcommittee hearing on the proposed at&t-t-mobile merger. you will hear from ceo's of both companies. if approved, it would combine
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the second and fourth largest wireless companies in the country. this is about two hours and 10 minutes. >> the proposed merger will bring together two carriers to create the nation's largest cell phone network with an estimated 43% market share. if the deal was approved, at&t and verizon will control close to 80% of the national market. creating such large shares in an
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already concentrated industry make it incumbent upon you to justify that we do it. the industry began in the 1980's as care phones used by business people. it has now become the main way we communicate. cell phone are increasingly the main weight millions of consumers connect to the wealth of information on the internet. as anyone knows who has ever observed people at social events, we are quickly becoming addicted to the price screens of our mobile phones. a few years ago, competition was a bright spot for consumers. they had a choice of no fewer than six national companies. as a result, the competition led to the rollout of ever new services. today the situation is different. this deal would lead us with
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only three national companies, two will control nearly 80% of the market. there are real fears that the third string will be sold to one of the two big ones and we would wind up with a cell phone duopoly. the industry is in danger of referring to a duopoly in the new surgery -- century. is putting the control of such a vital economic sector relied upon by millions of people daily to just two or three companies good for our country? we will examine the critical questions of reducing the number of companies to 3 -- will mean to our country? what will the absence from the market of the lower-priced t- mobile mean?
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will at&t and verizon gain a stranglehold? some argue that the presence of regional carriers as to the number of competitors. we must remember these are mobile phones that consumers use while traveling. to provide the service from the regional services must pay ruling fees to connect customers to the national phone networks owned by competitors. the small regional companies have to pay at&t and horizon millions of dollars in rome in fees. does that harm their ability to compete? these regional phone companies often do not have access to the newest and most in demand smartphones that consumers want. can they compete with the giants without offering the most up-to- date phones? deal willrved the zea allow them to cover 97% of the
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nation. we must ask whether it is necessary for at&t to merge with one of its three main competitors to do this. could it achieve this goal by spending some of the $39 billion it will spend to acquire t- mobile to expand the network instead? closing the same rules of basic economics and common-sense applies to this industry as all others. four competitors are better than three. the more competitive providers of service, the lower the price, the better the quality of service, and do more innovation the results. we must keep in mind that the cell phone industry is highly profitable and rapidly growing. the burden will squarely fall on at&t and t-mobile to convince us why the merger is desirable, how it will benefit consumers, and to put aside our concerns that it may turn out to harm competition.
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i now turn to our ranking member for his opening remarks. >> given the large number of witnesses participating in the hearing and the complexity of the issues we will be confronting, i will keep my opening remarks as brief as possible to have time for questions. the mobile phone market is a critical component of our economy. according to recent estimates, it is directly responsible for more than 250,000 jobs and generates over $150 billion in economic activity each year. it accounts for nearly $25 billion in annual capital investment. it is difficult to overstate the increasing importance of mobile devices in the lives of virtually all americans. many people rely on wireless phones as their principal means of communication with more than 1/4 of the population having become a wireless-only households. mobile devices are increasingly
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a primary means by which individuals access the internet. next year, smartphones sales are expected to be greater than the combined sales of desktop and black top computers. the explosion in demand for wireless services has led to significant capacity restraints that have affected the country. most of us are familiar with dropped calls and sluggish data speeds. the strength of available wireless networks is vital to families, schools, public safety organizations, and virtually all aspects of modern communications. with the current capacity crunch in mind, the obama administration announced last year in the national broadband planned a goal to lead the world in innovation with the fastest and most extensive wireless networks of any country. an important question before us today is whether the proposed merger between at&t and t-
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mobile is a positive step on the path toward a world-class wireless broadband network in the united states. there are a number of reasons to believe the merger could contribute to the goal. at&t and t-mobile are unique in having roughly compatible networks, complementary spectrum holdings, and a well-matched system. a merger between the two may provide immediate efficiencies that will enhance service quality and increase data speeds. ultimately, the entire wireless industry will require additional spectrum to address these significant demand for services. until the spectrum is made available, the benefits of the proposed merger will enable at&t to roll out the 4g network. at&t has committed to providing this new service to 97% of the u.s. population.
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in addition to offering better service and speeds, at this creates opportunities for hand set innovation and applications. i favor market approach instead of government intervention to develop the global network. the u.s. wireless marketplace is less concentrated than in other industrialized nations. some suggest our national interest would not be served by restricting the american marketplace to a larger number of providers build-equipped to build the most advanced wireless networks -- not equipped to build the most advanced wireless networks. i believe it is our responsibility along with the department of justice antitrust division and the federal communications commission to ensure the proposed merger would not produce damaging anti- competitive effects. the combination of at&t and t- mobile would create the largest wireless carrier in the nation
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with roughly 42% of all wireless subscribers in the united states. it would lead the market with only three instead of four nationwide carriers that would account for the vast majority of subscribers. a critical question is whether the smaller regional carriers can compete in a post-merger market to help preserve consumer choice and promote innovation. there are potential roadblocks to robust competition that deserve special attention. regional carriers with limited holdings must rely on the large national carriers for roaming access. a recent fcc order mandates major carriers offer commercially reasonable roaming agreements. the terms and conditions will largely determine whether the smaller carriers can become a true competitive force in the nationwide market. regional providers are often at
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a competitive disadvantage in gaining access to the most popular and desirable handsets. national providers with large volume and advertising budgets are better positioned to negotiate exclusive contracts for cutting edge devices and lower prices for purchasing and will. to address these and other issues relating to the competitive position of regional carriers, we would do well to remember the antitrust paradox that competition must be understood as the maximization of consumer welfare. our analysis of the merger should be guided by what will be best for consumers in the form of prices, service quality, and the range of choice. thank you, mr. chairman. >> we now turn to the chairman
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of the committee. >> thank you both for holding this hearing. i will ask for the number of my questions be submitted for the record. hearing indoing a the appropriations committee on military matters that are of some interest these days. i have to be there. when we talk about the competitive impact of at&t's proposed acquisition of t- mobile, it goes without saying it will have a lasting impact on the wireless industry. the present four companies control nearly 90% of the national market. this acquisition would further consolidate an already
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concentrated market for wireless communications. i am particularly concerned about what this acquisition may mean in rural parts of the country or a state like vermont. there are parts of my state that still have no wireless service. i live 5 miles from our state capital on a dirt road. he was only recently i was able to get a modest form of high speed internet. the two communities on either side of me headed. our town did not. we are typical of many other places. -- the two committees on either side of me had it. our town did not. it was acquired the verizon --
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it was required that vermont have access to the iphone for the first time. acquisitions should provide similar consumer benefits. wireless carriers contend the shortage in available spectrum limits the ability to improve and expand service. i will use vermont as another example. in vermont, at&t and t-mobile have large blocks of unused spectrum in rural areas. that leaves vermonters with more dropped calls and fewer options. there are places where emergency responders have no way of communicating. at&t and t-mobile argue they will be able to provide a greater number of consumers with more advanced technology than
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either could independently. at&t presented to me that within two years, the acquisition will result in 250,000 more vermonters having access to the 4g service. knowing how slowly things have moved in the past, i hope you will forgive me if i am skeptical. on the questions i have, i would urge at&t and others to respond in writing. i look forward to hearing more details on the basis for their representation. i want assurances that at&t will follow through on that kind of buildup. most vermont cellular customers never considered t-mobile as a
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viable option because they have little retail presence in my home state. at the same time, t-mobile owns a great deal of wireless spectrum across the green mountains. until the announcement of the acquisition, that is being built up by t-mobile. at&t also owns a great deal of wireless spectrum in vermont. the spectrum is not being used. i have been impressed with their aggressive buildup today. i compliment them on that. i worry that many rural areas will be left behind with or without the acquisition. this is extremely important. it was going to create jobs in many parts of our state. one of the first thing we hear from companies that want to go in is about the kind of wireless we have. there's no doubt that at&t and t-mobile are at the forefront of
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innovation. each company has a history of developing new and creative and amazing ways to enable consumers to communicate wirelessly. i do applaud their work. it is this history of innovation and highlights the importance of the antitrust laws. consumers benefit from more choices and lower prices. i am concerned about jobs in vermont and throughout the country. expect the department of justice and the federal communications commission to conduct a careful analysis of the acquisition and its impact on competition. the analysis should include the impact of the proposed transaction on consumer prices, choices for phones and data plans, and whether the acquisition will stifle or promote innovation. i expect the justice department is wary of creating a market
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where additional companies need to merge to survive. again, i thank you for holding this hearing. i think it is extremely important. >> we now turn to senator grassley. >> thank you for holding this hearing. this is a very important matter. it is going to get more attention as time goes on. i appreciate the arguments i have read on both sides. there is much to learn. i think people are beginning to take notice of this. in three of my 33 town hall meetings during the spring recess, this issue came up. people ask me what i thought of it. it was just announced that particular time. and characteristic of me, i have not answered most of their questions -- i did answer most
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of the questions but not that one. i asked people whether they were for or against it. none of them venture to guess whether there were for or against it. i did not learn from them either. anyway, this is something that is going to get attention. i look forward to the testimony we will receive today on the proposed merger. i hope witnesses can explain the impact the combination will have on consumers, prices, competition, and access. there are many rural areas of the united states that are concerned about service, particularly in my state of iowa. a want to hear how the proposed acquisition will help people in my state gain access to faster services. i will have questions along those lines. i will also have questions along the lines of whether it will increase rates and help spur
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more consumer choice. mr. chairman, i will be back and forth between this committee and the finance committee. we have a hearing now on the free-trade agreements. i would like to come back and ask questions if i could. thank you very much. >> we would now like to introduce our panel of witnesses. the first witness to testify today will be randall stephenson, the chairman of the board, president and ceo of at&t. next we will hear from philipp humm of t-mobile. he has served as chief regional officer and an executive committee member of t-mobile international. next we will hear from dan hesse, president and ceo of nextel and president and chairman of the wireless association. our fourth witness will be mr.
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meena of cellular south. he was recently elected chairman of the board of royal wireless association. next we will hear from gigi sohn of public knowledge, a public interest organization dedicated to promoting innovation and protecting consumers in the digital age. finally, we will be hearing from larry cohen. thank you for hearing at the -- appearing at the subcommittee hearing. we ask the witnesses to rise and raise their right hands inside ministry of. do you affirm that the testimony you are about to give is the truth, the whole truth, and nothing but the truth so help you god?
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mr. stephenson, we will begin with you. we ask that the panelists limit their comments to 5 minutes. >> thinking. -- thank you. i am randall stephenson, chairman and ceo of at&t. i do appreciate the opportunity to talk about the consumer benefits of the proposed acquisition. this transaction is about consumers. it is about keeping up with consumer demand specifically. it is about having the capacity to drive innovation and competitive prices. most important, it is about getting consumers would expect. that is fewer dropped calls, faster speeds, and access to high-speed fourth generation mobile internet service whether they live in a large city, small town, or out in the country. over a short time, we have seen a major revolution in wireless.
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smartphones and mobile apps have exploded. innovation has cycled at an amazing pace. consumers and the economy has benefited. our network more than any other has carried the load. over the past four years, volumes on our global network shot up by 8000%. to meet demand, at&t invested more in the united states than any of a public company. $75 billion in capital. we continue to invest in an aggressive pace. the next wave of demand is already on us in the form of tablets and mobile high- definition video. in 2015, just four years from now, by the middle of february, we estimate our network will carry as much mobile data traffic as we have carried the entire year of 2010. that is eight to 10 times higher
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than where we are today. that is an indication of how fast the mobile internet is growing. about the only thing we know of that can slow the cycle of innovation and growth is the lack of capacity to meet demand. that is why there is such focus on specter now. i do applaud the fcc and congress for their leadership on this issue. as the sec chairman has said, if we do nothing in the face of the looming specter and courage, consumers will face higher prices as the market is forced to respond to higher demand and forestry service. i do not think any of us want those things. even with the focus and efforts, it will be several years before significant amounts of new spectrum are placed into service. that is a reality we face. to meet growing consumer demand, we have to find ways to get more capacity from the existing spectrum. that is what this combination
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will do. our team of companies have complementary assets. combining the will create war network capacity than if we were operating separately. more capacity needs improved service, fewer dropped calls, and a faster and more reliable mobile internet experience. it is a basic concept. in any industry, greater capacity is a fundamental driver of competition and innovation. the u.s. wireless marketplace is among the most competitive in the world. it will remain so after this transaction. over the past decade, u.s. wireless prices have come down dramatically. this transaction allows the trend to continue. we are also committed to providing mobile internet service to more than 97% of the u.s. population. that is nearly 55 million more americans. it is millions more than any other provider has committed to this point. we understand the benefits this will bring to small towns and
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rural communities. we will deliver the benefits with the only unionized work force of any major carrier in america. current t-mobile customers will be able to maintain existing rate plans and gain access to lte service. that is a quick overview of the transaction benefits. it has gotten strong support from unions, consumers, and local representatives, as well as industry experts. thank you for your time. >> mr. humm? >> good morning. i am ceo of t-mobile usa. i appreciate the opportunity to testify on behalf of t-mobile. i joined t-mobile in july of 2010. a became ceo in november of
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2010. t-mobile was facing a revenue declined 47 consecutive years and weakening brand position. with implemented a new strategy aimed at leading the company back to growth. revenues have stabilized. returning the business to growth will not be sufficient to secure our strategic future. data usage continues to explode. facing spectrum exhaust over the next couple of years in a number of significant markets, our spectrum holdings will not allow us to launch lte. we also walk below band spectrum that will allow us to offer full coverage, to reach homes and suburbs and rural areas. in addition to these unresolved
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strategic issues, t-mobile is not in a position to finance the necessary investment in the u.s. to remain competitive. the combination with at&t allows t-mobile to address these challenges as well as realize benefits for its customers. the combination brings together two uniquely comparable companies achieving synergies while benefiting the american economy, consumers, and t-mobile customers. we have identified at least four major benefits for our customers. first, t-mobile customers will enjoy improvements in coverage for access to at&t spectrum. with the acquisition, t-mobile will be able to offer to nearly all of its customers full access to the at&t spectrum. it will significantly improve
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coverage to customers. customers will be able to take advantage of these improvements shortly after the transaction closes. second, the transaction will result in quality improvements for t-mobile customers. as a result of at&t and t- mobile compatible technologies, the combined company will be able to quickly emerge the networks and full spectrums. significant operating efficiencies will be achieved. for t-mobile customers, this means better coverage, fewer dropped calls, and faster and more consistent downloads during peak times and in high demand locations. third, the transaction will also give the combined company the resources and spectrum it needs
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to broadly deployed next generation services. t-mobile does not have sufficient spectrum for the network while continuing to support its existing networks. combining the spectrum of both companies, the entity will be able to support lte and the two legacy technologies. it will allow us to reach more than 97% of the u.s. population. that is something t-mobile would not have been able to do on its own. fourth, the transaction will allow the combined company to increase capacity and significantly reduce costs. it will drive prices down and enhance opportunities for innovation in the competitive market. the marketplace is very competitive. approximately 3/4 americans live
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in areas serviced by five providers. value during customers are the base of t-mobile customers. consumers across the board will benefit from cost savings and capacity increase. we expect increased competition will benefit consumers. without the deal, constraints would keep us from providing a vigorous competition. i am confident that t-mobile customers will experience significant benefits from the proposed combination with at&t immediately and long term. the transaction will provide our combined customers and the american public with services faster than either company could provide on its own. the competition in the industry will continue and be stronger
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after the transaction. thank you for your time. i welcome any questions you may have. >> mr. hesse? >> in the ceo of sprint nextel. thank you for the opportunity to address the potential negative consequences of the takeover on american consumers, innovation, and the economy. and like to focus on how and vertically integrated duopoly would impact the wireless industry. i am not here to ask for special conditions. i am here because sprint has a stake in the impact this acquisition would have on an industry that has prospered on competition and innovation, the very elements that this transaction friends. sprint was born out of competition. we operate in an open and competitive environment where innovation tribes and technological advances expand rapidly.
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the open and competitive benefit benefits my company and consumers. the market has driven tremendous growth. it took 100 years to build one of the fixe -- 100 million fixed lines. at the end of 2010, there were over three and a 10 million subscriptions to wireless. robust competition is driving prices down and quality of. as of june 30, 2010, 1/4 of all adults live in wireless only homes. the impact of wireless competition on the economy has been profoundly positive. in 2010, the wireless industry accounted for nearly $160 billion in revenue. it employed about 3.6 million americans. if the industry remains competitive, productivity gains in the next 10 years will amount to almost $860 billion in
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additional gdp. creating an integrated duopoly will reverse the progress and stifle the industry. congress and the fcc opened the original wireless duopoly to competition in the 1990's. the firm's injured and competition began to make a noticeable difference. -- entered the competition and began to make a noticeable difference. this will turn back the clock on that. this will put ma bell back together again. let's examine what they would control in a pos-acquisition world. there would control 80% of profits. two companies which control most of the vast infrastructure and the critical last mile to the industry needs to provide affordable rates and quality service. with control of nearly 80% of
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the market, they could discourage device manufacturers from partnering with anyone else for the next generation of smartphones and tablets. two companies would largely controlled pricing. they would have significant unchecked leverage to increase prices for voice and data. with the deal, the downward pricing pressure would diminish. regional providers have less than 5% of the total subscribers and cannot discipline prices. beyond what the bills would control, the acquisition does little to provide the benefits that at&t claims. consider that even without the transaction from at&t has the largest licensed spectrum holdings of any wireless carriers in the country. rather than building of the spectrum, at&t is warehousing it. verizon has more subscribers and
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less spectrum and at&t. it recently stated it has sufficient specter until 2015. t-mobile is using the spectrum heavily in the same high demand areas in which at&t claims to need capacity. at&t does not use the spectrum of has. adding t-mobile spectrum would not give at&t the relief it claims to need. at&t already has the spectrum and resources it needs to serve rural america. adding t-mobile extends the reach to only 1% more of the u.s. population. the wireless industry thrives on competition. that drives investments, innovation, consumer choice, job creation, and u.s. global leadership in communications. if at&t is permitted to our one of the two remaining independent national wireless carriers while the rest of the world achieve advances in technology innovation for the 21st century, the united states could go backwards to last
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century's ma bell. there are only three in the fisheries of the proposed transaction. shareholders of the organizations. the fundamental problems of the duopoly cannot be fixed with conditions. the merger is an fixable we ask you to just say no to this takeover. thank you for holding this hearing today. we are asking you to say no to the rear -- irreparable harm that could result from this merger. i thank you for your time and am prepared to answer your questions. >> the morning, mr. chairman and ranking member. thank you for inviting me to be here today. i have been in this industry for over 23 years and with a lot of
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help, have literally built our company from the ground up. the u.s. wireless industry is at a pivotal point and policy- makers will determine the fate of the industry. over the past several weeks, we have carefully reviewed this proposed takeover. we can find nothing good about it. it is bad for consumers. it is bad for jobs. it is bad for competition. if regulators approve this acquisition, all that remains is the endgame read the remaining non-bulk carriers patiently wait their turn to be acquired or bled dry by the biggest to back carriers. when i began this business in the 1980's, there was a local duopoly in every market. consumers had just to make choices for wireless services. this of -- consumers had just two choices for wireless services. this era is remembered as one of
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large funds and even larger customer bills. in a duopoly, the market can quickly reach equilibrium, and evoke providers are reasonably happy with their positions, that is how things will stay. but by the end of the late 1990's, as dan referred to earlier, the u.s. wireless industry began to awakened when the new group of competitive carriers entered this market and launched what we refer to as the competitive era. competition was important to congress at that time. the sec auctioned licenses to new entrants to build networks, attracted customers, and just generally disrupted established markets. suddenly, local duopolies were forced to respond to local competitors. new cars -- new coverage areas, better customer service, and more innovative offerings. in order to acquire and retain
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customers, we had to get creative. free nights and weekends, free incoming calls, and after that, unlimited calling. we had not done these things before because quite frankly, we did not have to in the era of global duopolies. it was hard work to stay ahead of competition, but those that worked the hardest and were the most innovative were the ones that were rewarded. unfortunately, all that started to change in the middle of the last decade. it was around the time that we began to see humpty dumpty being pieced together again, through unfettered mergers and acquisitions. it was only a matter of time before the former ma bell reconstituted herself into at&t and verizon. it has led to less choice for consumers and routine abuse of power in competition at every turn.
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at&t has specifically done just that the exclusive deals on handsets that the chairman referred to earlier and also by withholding roaming agreements and by leveraging its control over device and infrastructure vendors. this is only possible because regulators were asleep at the wheel much of the last decade. now we are at a decision point. as everyone in the industry analyzes every aspect of this acquisition, policymakers have this question before them. are we entering the era of the nationwide duopoly, or going to provide a landscape in which a second competitive era might blossom. cementing a national duopoly in place, or will it not? if this acquisition is
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approved, policy makers must begin preparations to regulate every aspect of the day-to-day business of the duopolies'. in a nutshell, that is why this acquisition must be denied and why it is in consumers' best interest to chart a new course toward a new competitive era of wireless. the fate of this acquisition determines the future of our industry. it as pretty is as simple as that. the good news is that this takeover can be stopped, and you can lay the foundation for a new era of wireless competition, an era where jobs are created throughout the land, a truly competitive era with a wide variety of creative minds being stimulated to deliver affordable, broadband networks, high-quality high-speed networks, with the ubiquity of the people of our nation deserve and demand. thank you. >> thank you very much, mr.
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meena. >> thank you for the opportunity to appear before you. i would like to set the tone for my remarks with a brief video. [unintelligible] >> you can video chat anywhere. largest 4g network. >> that commercial illustrates the situation have today. a vibrant national market in which four vendors can make fun of their competitors. if the merger comes to pass, the wireless market will be transformed to something quite different.
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we will go back to the days when this bone was in use. only two companies ruled the cellular phone market, resulting in high prices for consumers and little innovation. in 1993, the year after this all came to market, congress created the world's market we now enjoy by empowering the sec to offer spectrum and create competition. prices dropped. innovation exploded. consumers benefit. over the years, that competition has gradually eroded. if this deal goes through, that era of competition and innovation will come to an end. consumers know this already. almost 5000 individuals have written in to object. t-mobile customers are irate. a poll showed that 77%, or about 7300 consumers, are
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opposed to the deal after just a couple of days. after the deal was announced, people emailed unsolicited, asking what they could do to stop the transaction from going forward. more than 1000 people have signed our petition. these are real americans seeking to preserve competition with competitors. if this merger is approved, two- thirds of the integrated companies will control 80% of the market. sprint will instantly become a takeover target. a monopoly is what would happen -based services. applications developers would be subject to the two limited, non- competitive markets. while t-mobile was the first carrier to use the open end
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troy operating system, at&t has a history of blocking innovative acquisitions. if at&t is concerned about special capacity, it could stop operating three different types of networks, an inefficient system, which according to one analyst results in 7% of its spectrum be underused. completely unused is one-third of the spectrum in the top 21 markets. it would reward at&t for failing to invest adequately. if at&t wants to bring service to rural areas, is free to do so and it could do so now without any constraints. there are no spectrum shortage is in rural america. at&t has pledged to spend $39 billion on this merger. if at&t wants to create jobs, it
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can do so without buying out a low-cost competitor. thousands of workers in retail stores, call centers, and sales staff will be let go. this transaction is a pivotal moment in u.s. antitrust laws. if that law means anything, this classic murder of one company buying out a smaller competitor in the same business must be denied. there are no conditions or divestitures that could make this deal expectable. i urge the members of the subcommittee to oppose this merger after reviewing the facts. thank you, and i look forward to your questions. >> good morning. i am larry cohen, president of the communication workers of america. i represent hundreds of thousands of workers in the networking content sides of this industry. we look forward to this review,
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both by the congress, the part of justice, and the fcc. we believe there are three key points. first, that this merger represents an opportunity for this country to accelerate high- speed broadband deployment. second, that the transaction with conditions can positively impact consumers, and third, that absolutely there is a record here that with the right conditions will increase jobs, both directly in the surviving company and in the key economic development that it can bring to rural america. four years ago, we launched our speed matters campaign to highlight the importance of high speed broadbent for our natures future. high-speed internet is essential for the quality of our lives. smart reds have enormous potential, but they remain
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beyond the grasp of tens of millions of americans unless we are able to accelerate the development of true high-speed, wireless broadband networks. if you look at the global perspective, the u.s. has fallen behind 25 other countries, including romania, and the capacity of our broadband networks. the president highlighted this in his state of the union, but we have no path to closing this gap. our view is that this murder, with conditions and with the commitments made by t-mobile and at&t -- our view is that this merger is a critical way to bridge this gap that exists in terms of the u.s. versus the rest of the world. it is critical for economic development. at&t commits to deploying next generation of wireless. these would need to be in the commitments and conditions, to 97% of the population within the next 10 years.
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today, only 20% of u.s. broadbent subscribers indeed it is about data speed. we saw that with microsoft's announcement to buy skype. it can be data over cable, wireless, wireline. the effects of this merger are especially significant for rural americans, most of whom are on the wrong side of the digital divide. we need investment and speed. those can all the conditions of the merger. the real question is not whether t-mobile will survive as an independent competitor. the cannot be forced to make the investment to 4g. 4g is the global standard. with all due respect to my
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colleague and friend, this is an open and shut case. at&t will commit and is -- conditions can be applied on the merger that absolutely provide for when investment will be made, what the speech will be, what pricing will be, etc. it is an opportunity this country cannot afford to miss. we are falling behind in the global economy, partly because of these infrastructure needs. at&t has the financial resources to deploy 4g. sprint has incompatible technologies and they are already beyond their own reach. at&t and t-mobile have similar and compatible technologies, and sprint does not. they have three other technologies. finally, this merger is good
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for u.s. workers. in not a single case have workers lost their jobs. we believe the conditions can be applied to this merger. fcc did it in the bellsouth merger. there was no loss of employment and was renewed investment and commitment to the rural south. it was good for workers and good for those communities. we think similar conditions need to exist in this merger went is in fact approved. in the long term, the expansion of at&t's network holds the potential to create thousands of new jobs both in this industry and in the rural communities. thank you. >> we will now start a round of questions. mr. stephenson, one of the major concerns is what it will mean for prices that consumers pay for service. you seek to acquire one of your
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three national cellphone competitors, reducing consumer'' choice from 4 to 3. t-mobile has been a price leader, in many cases undercutting prices offered by your company, verizon, and sprint. t-mobile right now offers an unlimited voice, text, and that a plan for $35 less than a comparable plan from your company. why is it not allowed to assume that the loss of t-mobile will calls competition to erupt and prices to increase? >> i will restate just briefly what i said in my opening comments. this is unequivocally moment -- one of the most competitive industries in the u.s. today in terms of wireless industries around the globe, probably the most competitive around the globe. one of the best ways to revive a
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way that is to look at pricing. if you look at just the last 10 years in this industry, there has been a number of consolidations. irrespective of that, over this time horizon, voice price in this industry has come down by 50%. if you just take a snapshot of the last four years, it is all about mobile data now. in the last four years since we launched the iphone, the pricing for a mb of data has come down by 90%. what is driving that is competition. regardless of what market you are in, 74% of the customers in the united states, when they go to shop for wireless, the have an option of five or more wireless facility based providers. this is a vibrant, active market. i do not see it changing the
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trajectory of pricing in this industry. we are at a situation now where we are capacity constrained. t-mobile is as well. we have markets where we are within literally one or two years of failing to have sufficient capacity to continue growing over networks. there's only one byproduct of that, and that is pricing or rationing by product. putting these two companies together, freeing up spectrum, allows us to continue to grow capacity. capacity is the basis for moving prices down in this industry. my expectation is, prices will continue to move down through the competitive environment. >> in your testimony, you said going forward if this happens, it will be difficult for any company to effectively challenge that it duopoly even
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if it reduces quality or raise prices to customers. if this happens, what i take your comments to me is that you have real concern about your ability to maintain yourself as a national competitor in the market with your 17% of the share vs. 80% that the other two companies would comprise, and that in fact, it also happens your company in terms of its necessity to maintain itself, perhaps some day selling out to one of the two majors. is this conceivable? >> it is conceivable, yes. it clearly would make our position more challenging if you put 80% of the revenues in the hands of the two companies, i believe that have pricing power. given that handsets are purchased nationally and in
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bulk, it would give them tremendous scale advantages. they would become a gatekeeper for new applications and operating systems. they would always get it first because of their size and scale in terms of innovation. what this hearing read what has not been discussed and of its outside of the wireless industry, and that is the vertical integration of the two. that is the control over the last mile. it is a huge piece of the cost structure of all wireless carriers. i am the chairman of the ctia and one issue we have a special access. i believe there is a fundamental conflict of interest between
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at&t and a rise and being able to block wireless industry initiatives to give its weight behind reducing special access because of the verizon and at&t people. as prices come down for special access to us, we could make wireless service less costly. as wireless service becomes less costly for consumers, it accelerate score cutting of local land line. bells do not have an interest in substituting wireless for wireline services. it does make us more of a takeover target over time as the competitive environment it's much more difficult for sprint. >> mr. hess says we may go from
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3 to 2. i would like to respond to that and also respond to your comment on spectrum scarcity. your chief technology officer this year stated ago i think there has been a belief that there is spectrum shortage at t- mobile. he goes on to say that is not the case in the near term or the medium term. if you look at the bottom of spectrum that t-mobile has to date, our ability to grow is much stronger and our competition. we are in a good spot. we do not have a shortage of spectrum. you said today you do have a shortage of spectrum. >> both things are correct. what he was referring to is that we have on the short term sufficient spectrum to grow our data revenues. what is not mentioned is that we
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do not have enough spectrum to launched [unintelligible] we cannot start the rollout because we do not have the spectrum. the other thing that is important to realize, it has historically taken between two and three years to clear spectrum which we have acquired. we now need spectrum to be able to fulfill the demands of tomorrow. from that point of view, we see ourselves as being spectrum constrained, in the medium term, and the other constraints is capital constrained, to basically do it on our own in case it would be available. >> i just want to make the point that if we go from four to three and then we go from 3 to 2, that
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is pretty serious, and we will come back to that. >> i would like to start with mr. stevenson. some of your critics have noted that at&t has more unused spectrum than any other wireless carrier. one question i have on that point is, could you tell us why you have yet to fully utilize your existing spectrum holdings , and instead you are seeking to acquire it new spectrum through this acquisition and others. >> i will be glad to. as we have discussed and said publicly, we are aggressively moving to launch the fourth generation of global broadband technology. this is the technology that will begin to give us 15 mb experiences for the consumer. in our industry, we launch technology, and this is a very
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fast-moving industry. five years ago we began to move from second generation to third generation technology. to make a move in technology, you have to have a clear block of spectrum to deploy the new technology. we launched smart phones and the iphone, etc., and that business is growing dramatically. we now need to make the move to fourth generation for a number of reasons. the speed benefits, but also it is more efficient. to make that move, we have to have clear blocks of spectrum, and used spectrum. it has to be clear, unadulterated spectrum to make these moves. to do lte, we need 20 megahertz of contiguous spectrum combined. we have gone a number of places to piece together this footprint. we spent $7 billion on
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government option to buy 700 mhz of spectrum. this is where we are going to put the really high performing in networks. we are building into the spectrum now. we acquired a company that had a block of this spectrum that we were able to put together with what we bought from the fcc. we have been out pursuing and buying spectrum the best we can. we don't have enough spectrum to employ this nationwide, but the spectrum is unused today because we are building out the technology into that spectrum that we will begin launching mid year this year. >> if you were unable to acquire t-mobile, what would your options be as far as developing your 4g lte network? >> is a long-term solution. we would not have the spectrum
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debt we need. we need spectrum in those communities. a classic case, the have a very nice footprint in west virginia. we do not have enough spectrum to launch in west virginia. this would allow us to cover large portion of west virginia. >> is it your position that the nation would be better served by a smaller number of providers with access to more spectrum than it would be by a larger number of providers, each with access to smaller spectrum holdings? >> that is a public policy question. there are a number of companies out there that are aggressively deploying for generation technology. a lot of them are deploying it quickly because they are doing leapfrog approaches. they do not have second- generation and third generation
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occupying their spectrum. metro p c s is doing a leapfrog technology. you have a number of companies like spread. there is an article this week, they are going to launch its fourth generation network in washington d.c. i believe if we have a public policy objective of getting to 98% coverage of mobile broadband, that is an additional 55 million people, we will have to think differently and allow companies to make better use of the spectrum. >> that we ask a related follow- up question. some claim your acquisition of t-mobile will result in a duopoly. i realize you may disagree with that assertion. do you believe that further market concentration is likely
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to results in more regulation of industry? >> i cannot judge what happens with the regulation. from my viewpoint, this is such a high for competitive industry that additional regulation does not seem warranted or lightly. we have a history in terms of what happens to pricing in this industry. the options available to the consumer in this industry are dramatic. if we keep going from four to three or three to two, if you just look at the last quarter of results published in this industry, we tend to skip over metro p c s. this is a viable, large-scale competitor that is saying we have people coming to us all the time. they added over 700,000 subscribers in the last quarter. this is anything -- this is a
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bargain, active, competitive environment. >> some of your public comments have suggested that spread might not survive an at&t-t-mobile merger. is that your position? >> my position is that it would make it more difficult for sprint to compete. i have never said that we would not survive. i not survive. i think that the real question is that if this were approved, my view is that people are fundamentally making this decision that it is a duopoly and it puts us in a position to be acquired. >> currently sprint is the third largest provider in this industry. it has recently and substantially increased its survivor but -- subscriber base.
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it offers a wide array of popular products and handsets. in light of those circumstances, what obstacles stand in the way of sprint continuing to play a role as a robust and effective competitor in a post-merger market. >> one thing that i mentioned earlier in terms of continuing to improve the disadvantage is that we have, like allied will be silenced here in washington to try to, for example, get access rates reduced. at a certain time it becomes a bridge too far. u.s. about regulation. we have traditionally opposed regulation in the fcc in the wireless industry because we think that the market, when competitive, is the best form of
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regulation. but we recently supported their approach to rolling. the reason is that the alternatives, alltell purchased by verizon, signs of more regulation in the industry, and there are other downsides. i am concerned about how big the pie gets. how robust the industry in as compared to relative share. i think that with less innovation, the pilot will stop growing as rapidly and there will not be as much investment. financial firms and investors will be less willing and interested in investing if the wireless industry does not grow as fast. >> that is your position. >> yes, it is. >> thank you. >> thank you, mr. chairman.
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first of all, i, at this as someone who was in private practice for years representing a number of different private phone companies arguing that competition was good for the market. both in local and long-distance markets that it would bring prices down, which it as. also, talking to the senator in the commerce committee, i have put forward a cell phone bill of rights and her -- have heard time and again from cell phone companies that it is not necessary because there is so much competition did not have to worry about early termination fees being probated. i wrote your letter just a few days ago, but are you prepared to submit to offering your customers the current t-mobile pricing plan? >> as we said before, they will
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be offered their own right plants in the future. when you think about the at&t customers -- >> will the at&t customers get the price plan? >> at&t customers, had they wanted those plans, they have had those options for a long time now. the way that this industry works is that today we sell my $400 iphone for $50, meaning that we put $350 and to a product like that. we ask customers to sign a contract. generally two years to establish a business relationship with it that customer to make sure that we have an opportunity of recouping investment. we will ask our customers to stay with their contracts. just like we will honor the contracts of the t-mobile customers in the future?
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80-et's say that i was mobile customer and i dropped my phone in to my husband's coffee cup, which happened. if i needed a new phone, would i get a comparable rate? >> if it is a comparable phone. >> what about the monthly customers that are not other long-distance plan? >> absolutely. those will be mapped into the billing system. >> can you say that this is something you know will lead to lower prices for consumers and a better situation for consumers? >> i can tell you that history has demonstrated that these mergers have traditionally generated significant cost synergy benefits in the consumer's pocket. prices have come down significantly. >> you discussed out at&t believes officials should look at the proposed merger on a
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local and regional level. typically at think of the wireless market as national. part of my thinking is attributable to the marketing of national providers. looking at your own web site, you can see that your company likes to sell itself as a national company. that the national coverage footprint is getting even faster, that at&t already delivers the nation's fastest mobile broadband network. yet there is another web page claiming that at&t is superior to metro pcs and cricket because they do not have a national network. do they sell different pricing plans for different regions of the country? or do they sell them regardless of where they live? >> both. there are a number of markets where we specifically compete
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against those companies where we do you eat promotions. miami would be a classic that will where metro pecs as greater share. >> no, that is not -- >> sale of handsets? >> to standardize our product set across various geographies, i would tell you that the company is set up, we have organized this company to compete on a localized basis. i have folks that run different regions of the u.s. and people that run specific cities because i need them responding in promoting and addressing the apartment on a local basis. historic but we have been required to review these transactions based on local market because that is the way that the customer's decision is made. the customer goes into a store
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in minnesota or wisconsin and makes a decision based on the competitors in the marketplace of the time. >> can i say something on the regional? we are a regional company and have no customers on a regional plan. that is the way the market is driven today. >> concentration in the wireless industry has increased by 30% since 2003. investment has decrease 2005. it would appear that less competition has led to less investment in new services and equipment. do you expect this trend of declining capital investment to continue? how would less competition help? >> we do not expect a reduction
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of capital investments that the industry get ready for the next generation of networks. so, no is the answer. we do not expect it will lead to a reduction in capital investment. >> which would knowledge that competition has gone down? >> as we have stated, with this transaction we have overcome capacity constraints. as we have realized synergy, competition will increase. with that, we should also seek investments directly and indirectly in the industry. >> ms. sullivan, you have a different take on the issue. could you discuss your view on the spectrum and this notion that it has been discussed, this merger that will take place because of spectrum issues? >> basically, at&t has a
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wireless spectrum. one-third of that spectrum in the top 21 markets have not been built out yet. secondly, it uses that spectrum very inefficiently, using three generations of technologies. there are some that they can use -- i want to get to the continuous 20 mhz spectrum. it ignores channel bonding technology that would allow companies to aggregate and it ignores other company that increase proficiency and the visibility to reconfigure the networks. so, i think that the spectrum crunch is a bit overstated. >> thank you very much. >> senator grassley?
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>> in my opening comment, my state is world. some parts of my state where we are receiving consistent telephone service. it is simple. when they do, it is often not as fast as what someone in a larger city would receive. since announcing the merger, at&t has said it would be able to bring faster networks to were all areas. so, with mr. stephenson and mr. manlike to comment on this? how will this merger help rural constituents get faster rural " -- a role more -- rural mobile service. what about fees paid when they travel outside of the travel area? >> i will take that one.
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first, at&t has a holding of 850. anything less would be considered a low band spectrum. with significant holdings of 700 mhz. there is nothing in the t mobil bill that makes the liberal and more attractive in the future than it would be today. as far as the fees are concerned, one of the biggest challenges we have faced is trying to get a roaming agreement with at&t. especially data at the 3g level. even when there was a mandated april ruling, no progress was made towards that. april was just last month.
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we were told that the growing person was out of town. to enter your question, it is very important for carriers to be able to provide service that allows the device is to work anywhere in the country, rural or urban. it is important for the voice and data to work, wherever they go. >> in response, we have a number of deals around the u.s. with rural providers. rules have established tellep process should work, we are open for business on those services. as it relates, you have different technology. i will be happy to get something going after words -- >> we have a property -- >> for quite a while -- >> folks here in alabama. [laughter]
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>> as it relates, we have to build out this network. the t-global acquisition does facilitate places, particularly like iowa. as i mentioned earlier, there are two blocks of spectrum we want to build this into. there is a higher band with spectrum, that is what t-mobil operates on today. that is the elegance of the transaction. with that we will be able to do a number of things, freeing up the spectrum and allowing us to bring us to bring that in to the spectrum band, specifically to places like iowa. we will at 181 cities. that is a rural broadband to cities that would not have it otherwise.
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focusing on the concentrated areas, allowing us to build out highways and in rural communities. nationwide that number is 55 million people. the unique nature of this, why it is so important, but as we can i get there because we do not have adequate spectrum. the original bill that we are focused on right now, for about 80% of the u.s. population, that is 14.5% of the land mass of the united states. it has to go to 55% of the land mass covered, which is why it is so critical in getting it to rural america. >> i think that maybe you touched on this next point, specifically about sioux city in western iowa. the service there is more limited than other areas.
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t-mobile the study of an offer service, meaning there will be no real change in the region. what will it do, this merger, when at&t has yet to upgrade service in these areas already? is this something or you cannot do anything more? >> it requires some effort, but i think that we can do. obviously, team mobil in ireland -- iowa, i do not know exactly what that looks like. we will have to sort through those partnerships. partnership or otherwise to provide service. if not, we have 10 megahertz to take some risk. i have a lot of homework to understand what we can do with
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sioux city. it is complex. >> last question. in 2008 verizon and alltell had approved the merger providing there was no overlap in the market. what are the differences and similarities between the present, proposed merger and that merger? should spectrum be the best in the markets where at&t anti- mobile overlap? >> first, this consolidates much more power in the hands of the two than the previous merger. the acquisition target is much larger as well. it actually did not do much for the competitive landscape because of what verizon had invested.
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to addo you want anything? >> the advertisements -- >> and do you want to add anything? >> the advertisements that we acquired of the same spectrum that our networks operated. we could put our own infrastructure in place. many of these communities, it gave us a footprint. a network and a footprint in markets where we did not have one before. we have converted those networks to our technology and our spectrum. we are aggressively converting the customer base is now. this will facilitate going to fourth generation. >> we keep make the comment about realizing inefficient technology. i have mentioned this before, but these really this industry
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bond services and by 2006 we were putting it out there. wipha require them to push it into 3g. if we were to do that, i would suspect the would-be have been hearing before you for entirely different meanings -- reasons. we have to be elegant year. it takes time to work customers through the various challenges. >> thank you. >> thank you for holding this important hearing. by ensure that i love the only one here that remembers how much of bell controlled when and how they communicated with each other. i remember being a kid, every sunday at exactly 9:00 a.m., my grandmother would call from new
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york and talk to my father for precisely three minutes. [laughter] my grandmother was german. at 9:00 he would pick up the phone and after three minutes the operator got on the phone and colder that there was three minutes left on the end of the call. that was the only time she got to talk to her son and grandchildren. thankfully they forever change the cost of long-distance service. that we live in a world of voice-over in videoconferencing that would not be possible without high broadband speed. by fear that if approved, the merger would take us one more step, or just one step away, from the monopoly market that we had under ma bell.
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it took them 35 years to break it up. it is important to keep in mind the stakes of a merger of this size and scope. i hope, chairman, that this will be the first of several hearings. we all know that the merger is going to raise prices for american families and may cost thousands of jobs. i hope that we will hold a second hearing once we have more solid economic data that demonstrates what the merger will mean for customers tend to 15 years from now. i want to follow-up on the senator's comments regarding the national aspect of the steel. i wanted two questions with a yes or no answer. after that i promised i will let alachua respond. when you were seeking to acquire the verizon wireless
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spectrum in 2009, did you not state that -- evidence shows that the dominant forces driving competition amongst wireless carriers operate that the national level? yes or no? you did. ok. >> i do not recall the comment. let's i said yes or no. >> it is and i do not know. >> ok. let's see if you remember this one. if you see significant growth in new customers, by and large part, you do not have to remember this one, but it was in large part because you had to negotiate an exclusive deal for the iphone with a large national company that would not have the -- would not have even considered wanting their phone
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with a small, regional player. would that be correct? >> i do not remember the quote. >> i am just asking if it is true. was there significant growth because of the negotiation of the exclusive and said deal of iphone with apple, who would not have even considered launching their new phone with a small, regional player? what i would say no, look at europe. >> now you can explain. you do not think that apple gave you an exclusive thomas stewart regional player and not one national player? >> it is not as likely.
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>> not as likely. what's in your they did spread it around. one -- >> the thing that you forgot that you cannot remember what she said, you do advertisers, as a national company, but talking about how national your. this is a market where you can achieve significant advances from a national presence. how can you argue that this deal should be analyzed locally, as you do in your written testimony, that the deal should be analyzed locally, going again statements that she made before and in your advertising >> first
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of all, this is the way that the department of justice has require these transactions with national coverage. >> this advertises his national maps off of his web site. >> absolutely. >> we are in full agreement that this is a national market? >> i am still trying to get my head around the technology
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surrounding bad call agreements for wireless spectrum. basically using the labelle part infrastructure, right? roaming agreements and interoperability. i know that carriers like at&t and verizon have a tremendous advantage over everyone else because they owned and controlled the infrastructure. >> adjusted to the vacant head of the vantage over smaller companies and with an effort to return to the dominance that the ones that. >> to answer some of the questions that came up earlier, at&t and verizon were here and
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have used their market power to obtain exclusive deals on handsets. there is no doubt. for that device it was a for your exclusive. there is the special access issue. a huge abandons that they have there. then there is the issue of rolling. -- wyoming. the use those agreements to make sure there is a diverse product for customers to use. when at&t and verizon reached the size where it was not in their favor and we do have gps technology and you have special access. you have the scale over devices. you have roaming issues.
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next generation technology. the beachfront spectrum where there is no interruption of the earth -- and any peace from the line in '90s of work on either network. nell, with that the market concentration that they have. >> thank you. >> i think that we can all agree that at fifth the senator is
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willing to talk about his grandfather. and brother verma and that remember those telephones and i think that we did approach to this, recognizing that it was beginning of the process that was not what congress did. we legislated prospective mate upon stepping forward to
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revealing that, i feel that congress ought to be very humble about our ability lets the sector of the hon upon it has changed dramatically so i would like to ask each of you, let me start with mr. stephenson and mr. hess to comment on innovation. i know some of the concerns is somehow innovation would be stifled or retarded by this merger and i wouldn't, mr. stephenson and mr. hess, if you would give us your views on that. >> thank you, senator.
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one thing that you cannot say about this industry is it is lack for innovation. the innovation in this industry is happening at every layer of service. infrastructure players, carriers like all of us up here on this dais are seeing innovation go at an incredible pace, i mentioned it from 2-g, 3-g, to 4-g in five-year period of time. that innovation is happening very, very rapidly. we're talking about comes after 4-g. you see this innovation playing at the device level. there are 600 options to buy devices in the marketplace. to think of an iphone being launched in 2007 and today the customer can buy one for $50, that's inowe scration. when the iphone came out, what happened? you saw google deploying innovative devices, and dan's
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company, i think you deployed the first android device on fourth generation network. you're seeing that hard on the software level particularly. rim and blackberry with new o.s.'s and don't forget or miss the importance of what you read yesterday of microsoft buying skype. they run a very important wireless operating system that they have developed combining that with a voice-over i.p. capability now. this will be a very exciting and dynamic manifestation here. we are seeing applications hit the market at hundreds of thousands at a pace being down loaded billions of times. when i stop and think about this innovation cycle by verge -- virtue of mobile and at&t combining they will not delay one day the numbers five or six or whatever comes next, or affect his launch by one date for the ipad or school google down one iota in terms of developing the new o.s. capabilities coming or microsoft. don't think infrastructure
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players will slow down. dan has done an incredible down bringing the first true 4-g network to the united states. don't see dan slowing down. this is dynamic and exciting an industry as one could ever hope to work in. i consider that a privilege but i don't see it changing by virtue of that combination. >> mr. hess? >> senator, thanks, randall, for the plug on android. but i have to give credit to this innovator over here, t-mobile u.s.a. launched the android device and they, of course, would be removed from the market. we followed them shortly thereafter. i have been in this industry a long time. the u.s. led the world in 1-g, first generation which was analog. of that the first cell phone call inevented at bell labs. companies like motorola and we had this duopoly. it was important for the u.s. to create more competition because we fell behind europe.
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digital technology, d.s.m. rs that was european, we fell behind because of the lack of innovation in the u.s. wireless market. really had not innovated very much because it was duopoly. they opened up the u.s. market to more competitors, p.c.s. providers. i disagree with larry in terms where we stand in the world as way wireless review, and i give this presentation as part of the u.s. wireless association, the u.s. is now number one in the world in terms of wireless technology. we have the most 3-g customers of any company in the world or any country in the world, we're the first with 4-g. we're by far, ahead in 4-g. the companies randall talked about google and apple and microsoft and all of these innovative companies, they developed on our shores for a reason because this is a very vibrant market. my concern is if we go back to the duopoly, we will go back to pre-mid-90's and the u.s. will
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fall behind the world like we once did. we will lose that edge, that, you know, that we regained, if you will, over the rest of the world. >> let me ask one -- my time is running out quickly. there was one other topic. i think mr. hun, you mentioned t-mobile did not have the cappability to do these sort of infrastructure investments, which is one of the issues that motivated your company to engage in this -- in this acquisition, this merger. and mr. stephenson, you talked about how much money at&t has invested in broadband infrastructure. i remember when the congress passed the stimulus legislation, there was $7.9 billion included that in that because of the desire of congress to see somehow buildout and expansion of broadband for all of the reasons we understand and we talked about here today. my personal preference would be to see the private sector make
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those investments, not the taxpayer have to make those investments. how does this merger affect either positively or negatively, the ability of companies like yours to make that sort of investment? it strikes me this is a problem and i would like to hear your views. mr. stephenson first. >> we will go back to the president's comment establishing a public policy objective of 98% of america covered with mobile broadband capability. at the the elegance of this, is this is a private market solution for a major public policy objective. this is all private capital that will be used to build this cape ability out. there will not be any universal service money, any subsidies, any taxpayer money involved in making this happen. this can become a reality purely by private capital. you think about getting to 97% coverage. that means there's 3% of the u.s. that we still don't have the ability to cover through private market capabilities. you think of universal service fund and s.e.c.'s priority for
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finding a mechanism for getting broadband to america focusing on the 3% is a much more manageable objective than the 20%, 15% or even 10% we're talking about now. so this is just a very elegant potential to address a public policy objective with private capital. mr. chairman, with your permission, can i get mr. hess to respond, please, to answer. >> senator, i've made points earlier where we do not believe this merger facilitates this goal in any way. but even if you believed it were the case, at what cost? is it worth eliminating a very robust, competitive, extremely important industry to the u.s. economy in order to achieve that goal? i think the answer is no. >> thank you, mr. chair. thank you very much, snore cornyn. mr. hun n. its filing -- in its
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filing with the s.e.c. on this deal, at&t states, quote t. does not view t-mobile u.s.a. as i close competitor, let alone a major competitive threat, unquote. my view is this statement is incorrect given the large amount of competition that we see every day between these two companies. what is the view of that statement? does t-mobile view at&t as a competitor? >> we see overall the marketplace, we have a grossly competitive marketplace. we define ourselves as a sol unanimous competitor, mainly we compare ourselves mainly with companies like sprint or the -- which we call all you can eat players like u.s. cellular. >> look, you two are comet competitors, right? please. you two are competitors.
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>> we're competing in the same market. >> mr. stephenson, t-mobile is a competitor. you're competing with that man every day, is that correct? >> they're part of the competitive echo system in wireless technology. we're all competing. >> but you two are major competitors? that's almost and convertible t doesn't mean you don't have other competitors. we understand that. but you two are major competitors with each other. please. >> senator, yes, sir,ier. >> on your website you compare your prices for data services to at&t's and announce your price for unlimited 4-g data service is $5 cheaper than at&t's price for $3-g service. you also promote the fact your unlimited voice, text and data is $35 cheaper than at&t. this is pretty good evidence you view at&t as a competitor, does it not? >> we compare ourselves in the
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advertising you're referring to, we show the customers they can make relative to being at sprint and we show there is significant -- >> that's what we do with competition. >> and at&t and verizon, that's where the biggest savings are. >> yes, of course plfment stephenson, how can you say t-mobile is not a close competitor? you both sell the same service, cell phone service on a national basis and t-mobile and you are two of the four companies that own and operate national phone networks. is it really credible to come up here and sit here and tell us that you and t-mobile are not close competitors? >> they're not our competitive focus, i will tell you that. if you look at just the last quarter, you can establish where our competitive focus is. verizon adding over 900,000, sprint adding over a million, metro p.c.s. adding over 700,000, t-mobile lost customers in the first quarter. they are not our competitive focus. >> ms. stephenson, consumer
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advocates argue one of the motivations for the deal was to remove the price competition offered by t-mobile in the cell phone market. you deny that removing t-mobile as a price competitor was not at least one element of your motivation for spending $39 billion to acquire this company? mr. stephenson? >> yes, i do deny that, senator. that does not factor into the equation. again, the focus of our competition right now is at the high end of the market because, frankly, we are limited in capacity. we only have a certain amount of capacity to put customers up so we get very focused on what customers we go after. i would tell you if we were to get this transaction done, and we increased the capacity in the marketplace, that gives us an opportunity to move down market and we're looking very much forward to competing against metro p.c.s. and much more aggressively. >> mr. stephenson, at&t has argued that it is incorrectly considered this merger a
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reduction of competitors on the national market and a. we should view this in a local market where in many cases there are many local or regional providers. i find that your claim this merger could be analyzed on a local market basis remarkable as this is directly opposite to the position at&t and your predecessor companies took in prior mergers. and as s.e.c. filings at&t wireless argues that its 2004 merger with cingular, quote, should be analyzed as national. at&t argued in its 2008 merger with sen tena that, quote, the evidence show thats predominant forces driving competition around wireless national carriers operate at the national level, unquote. why has at&t now changed its position? which was true? which is true that at&t said in 2004/2008 or what you are saying now? >> senator, we have to go by how the d.o.j. and s.e.c. have
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evaluated these transactions consistently and they consistently evaluated tell at the local level. at the local level, these are intensely competitive market. in your state, in fact in wisconsin specifically, one of the regional carriers, u.s. cellular, has a greater market share than at&t and t-mobile. so these purchasing decisions are made at the local market level. >> you know, i will turn this over to mr. lee, you would almost argue here to us today that what you are wanting to do is something in the national interest. and that's ok. you're here to run a business and i'm a business fan myself and i appreciate it. and i understand it and we all understand it. but we should discuss it in the context. not this is the national interest. your consideration is what's best for your company and for your company. i appreciate that.
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the discussion should be hand at that level rather than this is something in the national interest. mr. lee gorks ahead. >> thank you, mr. chairman. i have a few questions. i assume like other regional carriers, your company cellular relies to a considerable degree with roam arrangements with national networks and this is part of what enables you to have the ability to offer your customers access to nationwide coverage. in your view, what impact, if any, would this merger have on these roaming arrangements? >> yes, sir, that's a good question. one of the major impact it's would have, it would eliminate potential l.t.e. roaming partner. a few months ago prior to the ademounsment of at&t and t-mobile, t-mobile made an announcement i think by 2014 there would be installing an
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l.t.e. network. l.t.e. is the next generation, worldwide standard that many carriers throughout most -- most carriers throughout the world will be going through. without having a vibrant l.t.e. roaming partner, one willing to work with us on a roam ago agreement, it eliminates the ecosystem you referred to that we must have in a roaming environment. so that's one -- one effect of that. also -- >> you see that as an unavoidable consequence of this merger? >> yes, i do f. it happens. >> what about -- the recent order man ditting commercially reasonable data roaming agreements alleviate the concerns you have in this area? >> it would not because what's going on with the 700 interoperability issue in our industry today, where at&t has a proprietary band class and verizon has a proprietary band class. even with a roaming mandate, we
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are not able to have devices that would -- l.t.e. device that's would work on their network in a roaming environment or work on verizon's network. that's why it's so important to have t-mobile or someone else out there with a 4-g l.t.e. network that we could have the ability to roam. >> would any potential merger conditions alombate the data roaming concerns you have that you have identified? >> i can't think of any. we were hopeful with the alltel verizon merger there would be conditions that would make the market competitive for us and that did not occur. we were not able -- we do have a roaming agreement with verizon, and can go into the specifics of that agreement. but it is not one in which that would allow us to be competitive over a long period of time. >> ok. mr. stephenson, would you quare to respond to this point,
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particularly the point about the inevitability of the problem he identified. >> yes, i'm confused with the point we need to keep h-mobile in play because that will give them an option to roam on a l.t.e. network when t-mobile stated they're not building an l.t.e. network and they don't have the spectrum to build an l.t.e. network. it doesn't seem it's a likely fix for whatever concern that shu has. in terms of l.t.e., the s.e.c. data roaming order will require us to open our networks up for others to roam on them. there's nothing to preclude hugh from buying a hand set that works on our -- -- on our spectrum in our system. that's his prerogative. i think what he would like do is require us to make our handsets roam on his stem, and that's a cost that i don't understand why our customer needs to incur. at the end of the day, i understand his concern with this because we are going to build
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out a competitive l.t.e. network to his network. this is competition. this is what we're looking for, more competitive networks being built. and having a concern we build ours out and we ropet roam on his network, i don't quite grasp the logic of that. but we will open our network up to all companies to roam on ours. >> that's just not correct. we are not looking for at&t to roam on our network on our l.t.e. network in the future. we would like to have the ability to roam on theirs. but because of this interoperability problem and the scale at&t and others and verizon have, the scale that they have to control the device ecosystem, we don't have enough -- we don't have enough buying power to be able to put in place a 700 mega hertz device that would roam within their band class. the reason this has not been a problem in the past is that in the p.c.s. spectrum, all devices
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worked across all band classes within each spectrum grouping. that's not the case here where at&t has their own proprietary band class and verizon has theirs and the 700 l.t.e. spectrum. >> are you calling for us to go back to the '90's where had you this complete interoperability? >> we had been calling for that for a couple years, we have been wanting the s.e.c. to act on that. we have a petition in front of them for i believe two years now, i believe, something close to that. that's something we would like to see interobject in the $700 mega hurts in all player spectrums just like it happened in cellular and like it happened in p.c.s. >> ok. in referring to this merger in your written testimony, you have said, quote, it must be stopped, close quote. and quote, the fate of this acquisition determines the course of this industry, close quote. in contrast, there are other region am providers that view
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the situation with more hope that you do. u.s. cellular stated it sees great opportunity for the merger, in looking at its own expansion opportunity. metro p.c.s. has said we think that this is a really good time for metro to put our head down and get down to business noting that the company very well could get a sharper focus from its infrastructure of vendors. and that there would be one less operator for them to focus on. help me understand why some of these regional carriers would view the merger as the end of competition or as the end of the world as we know it, the competitive armageddon so to speak while others view it as an opportunity for growth? >> i'm not familiar with those quotes you said. i'm not doubting you. i'm just not familiar with the quotes. i am familiar with this, united states cellular and metro p.c.s. are active members of r.c.a. of which i'm the member of the board and r.c.a. has taken a
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position we're against this merger. >> ok. thank you, mr. chairman. >> thank you senator lee, senator clobechur. >> thank you very much, mr. chairman. thank you very much. you broke in when i was asked mr. stephenson about the national market issue. do you want to elaborate a little bit on that? >> yes, it is a national market. that's why we publish a map like that that shows the roaming arrangements we have. we don't -- i can't remember how far back it would be when the customer asked us about a regional plan. we -- it's a -- we happen to be writhal company in a national business and that's what makes roaming agreements, et cetera, so important. but this deal should be evaluated on a national basis. market by market makes no sense. and a regulatory environment -- i admit i'm not an antitrust lawyer but from a business perspective, it makes no sense. it's all about national market.
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>> thank you. mr. stephenson, i know when we talked in this 0 senator chole's subcommittee about the northwest merger i cared a lot about that because we have a lot of northwest employees in minnesota. i know there are a lot of employees out there concerned about how this merger will affect them. can you comment on the employment levels, what you see, how this will affect current employees of both companies? >> the teamsters and others have come out in support of this and they are not in the habit of job creating. in our industry, it's not unique, you only hire when and where you invest. when we are growing is where we hire and that's mobility and broad band. this particular deal, this particular transaction, we have made public commitment and we're
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going to abide by this public commitment to deploy l.t.e. and senator, it is a public policy objective but in our shareholder interest to deploy this national l.t.e. network. $8 billion of investment to deploy this capability and technology we view this as an incremental investment and over the long haul incremental jobs opportunity. at the go-down, these type of transactions you do have overlaps in workforces. we're not going to need long term two finance organizations or marketsing organizations. we have done this a number of times. we think we have elegant processes for making this happen. larry cohen and i over the last five or six years have developed what we think is a very unique, very time tested ability of dealing with these types of situations. tpwhoshted, literally, two of us together a concept we call j.o.g., stands for job offer guarantees. if there are situations where there's overlap of jobs or
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particular business is shrinking and you need to down size, we declare those positions surplus but we do a job over guarantee. we find a growth area of the business or another part of the business where we need to hire and we give those employees opportunities to take those jobs in those areas. that is allowed us to manage our workforce we think very elegantly and very gracefully move out of the no-growth areas into the growth areas. >> let's go back to some of the consumer issues in a different context. according to the data collected by the f.c.c. in '08 and '09, at&t accounted for nearly half of all exclusive smart phone launches, compared to the one third share of overall smart phone launches. this data confirm what's most people assume, that at&t committed itself to using exclusive phone contract to attract customers. if this merger is approved, not only would at&t have 44% of all u.s. wireless subscribers but at&t would be able to demand
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exclusivity contracts from any moan makers seeking their business because of that enormous market share. do you think that's a fair reading of the situation, and are you going to make any commitments about these exclusivity agreements going forward? >> when i look at 600 different options of handsets in the marketplace today, it tells me this is a vibrant marketplace. i think every carrier up here at one time or another had some kind of exclusive arrangements. that's a means to get product to market faster and when the marketplace is utilizing these capabilities, we will probably participate as well. but i think you're seeing fewer and fewer of long-term type relationships. >> so your answer is the relationships are going down but that you're not going to make any commitments about the merged company, proposed merge company with exclusivity contracts. >> it's a dynamic market. it's a hyper dynamic marketplace. >> senator lee was mentioned
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this roaming agreement issue. will at&t commit to offering smaller wireless carriers data roaming agreements at reasonable rates? >> absolutely, of course we will. it's the law. >> very good. you look like you want to comment. >> randall offered earlier we can meet outside the door and talk about that. irlook forward to talking to him about it. we have been trying to talk about this company with 3-g roaming agreements and maybe we can work that out later on. anyway, that's all i have to say. >> how does the concentration in this city with this proposed merger compare with other large industries with entries like airlines or automobile manufacturers. >> well, it's about half. this initially would be twice as concentrated at the top two than the airline industry, banking industry, the oil industry, so the concentration here and if you look at the indexes both
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locally and nationally, in some places with this merger is over 3,000. and some markets it will go -- i think the national market will go 600 to 750 points higher and department of justice said 200 is an anti-competitive increase. so when you compare it to other industries, it's off the charts. >> in canada, only three companies dominate the wireless market. if the merger goes through, can we expect a similar situation in your view? what lessons can we draw from canada's wireless market? >> i have to say i'm a little bit bemused by folks looking at other countries and saying, well, those countries are more concentrated so why should we get more concentrated? we have to remember many of the countries, telecom providers are highly regulated, price regulation, wholesale access regulation. the carriers, does mr. stephenson want to go back to that? i seriously doubt that.
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on the whole, u.s. citizens pay more and i do find it ironic since every time there's a study that shows that the u.s. is 25th or 20th in broadband adoption and in value, the carriers say oh, no, no, those are all wrong and the countries are all different. they're different, they're rural. but here they want to look international. i find that a supreme irony. i don't think we want to go there. i think we want to stick with competition rather than regulation. >> just understanding you're from minnesota. we can see canada from our porch. ok. anyone else want to comment on the international comparison, mr. cosnean >> first, i want to point out when i talked earlier about where the u.s. is in global broadband, talking about the totality of the industry. what is is the industry? it isn't a wireless industry per se. it's wireless, wire line. it's well documented the f.c.c.
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report last year about the u.s. lagging other countries. i disagree totally with dan. we're far behind and getting further behind every day. countries like korea, we will not catch up to in our lifetime. it's particularly true in rural minnesota, rural minnesota, the kind of broadband speeds that are available are unthinkable in most of the other countries. from our point of view number one is, what is available, not only to u.s. consumers but in terms of economic development? and is there a way to have conditions on this merger that will deal with the fact that the u.s. is absolutely falling behind all of the time in terms of broadband speeds regardless of what mode we're talking about. and i think that's a large part of the reason, primary reason really why we think the merger is that kind of opportunity and, again, with safeguards and conditions why we should go forward. >> the one thing that disturbs me there, be and i'm sure we can do more discussions about this with everyone on the panel off this hearing, but it's just
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those numbers are showing the investment has gone down in recent years while competition has gone down. and so know no one wants more than me to stop having dropped calls in staples, minnesota, and stop having to carry two different kinds of phones to hope one of them will work when i'm on the road. but i'm not convinced that less competition is going to bring us there. >> could i just add that at&t has -- in 2009 invested 1% of cap x as wireless infrastructure while verizon has invested 10% of cap x. it's interesting to note verizon is not complaining nearly as much about the spectrum crunch. >> and verizon has less spectrum. >> right. craig moffett is a very well respected industry analyst has called at&t a serial acquirerer. and that's what they are. they acquire new companies. they don't invest adequately and that's why they're having the
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problems they're having today. >> i think, if you don't mind, mr. chairman, i think we will let mr. stephenson -- >> i want to respond to larry's comments because i think we're mixing up apples and oranges. in the wire land world, wire land dominated broadband access, dominated by at&t and verizon, we are behind in the rest of the world. in wireless, we are well ahead. we are the leader and that's a very important distinction. >> thank you. >> the issue is for rural america, there is no wire line opportunity. so as the president said in the state of the union, this is the opportunity for rural america to catch up. >> just the investment issue, at&t has invested more in the united states more than any company much less telecommunications company. $75 million in the last four years. 1%, i don't know where that number comes from. last year we invested $8 billion, $9 billion just in the
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wireless business by itself. there's obviously what we call fixed line investment back haul and i.p. back bone capacity serving the wireless business but the statement is inaccurate and we have invested more in the u.s. than any other public company. >> thank you. >> thank you very much, senator klobuchar, one last question for you, mrs. stephenson. some say if the merger is approved, it's likely to be approved with a number of questions. -- conditions. i think that's undoubtable. but would you accept as an condition of the merger prohibition from at&t using any universal service fund money for its rural broadband build zout >> for the sale to e buildout in yes, sir. >> anyone want to make any comments before we close this hear something >> yes. >> can i make a comment about the national versus local market, because this is driving me crazy, have you ever seen at&t advertise against metro p.c.s. or cricket?
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have you ever seen a local pricing plan? clearly saying that a behemoth like at&t competes, sorry, cell south or u.s. cellular or cricket is like saying that walmart competes against the mom and pop store. yes, has the justice department looked locally in the past? yes, the past. but we have an increasingly consolidated market, maturing market and in fact the f.c.c. and alltel and centennial mergers did start to look at the national market. so clearly the market here is national and i suspect that the department of justice and f.c.c. will look at that based on the facts of this case. this is an unprecedented merger. >> senator, i would like to add to this, because i haven't commented on the issue of national markets. i can speak for sprint and don't think we're that different than the big four. 99% of all customers are on
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national rate plans, more than the ivory snow percentage. 99% of our advertising is national. our handset deals are all national. business customers buy national and they want to see the maps. if you look at national advertising, what are the key messages? we cover 97% of all americans. verizon it's the map order. those are not county and state maps. those are national maps they're showing on television. also from a retailt distribution point of view, we sell more of our devices through the national retailers, best buy, radio shack, walmart, et cetera, than we do through our own stores. if this isn't a national business, i don't know what is. >> maybe just also one last comment to national versus regional, t-mobile we were national oriented up to last year and we decided to move to regional goal to moderate because we simply noticed the regional differences are too big for us to be successful only
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nationally. so we went toon organization we now have 23 different regions to approach the market region by region. just a few facts to support that point. just take for example a company like mid-tell in miami and another company 38% market share. sprint in johnstown in pennsylvania and another 0% market share. 20% in salt lake city and 0% in west virginia. it shows you how different we are and what kind of different competition we face from one d.m.a. or one market to another. >> i want to thank you all for being here today. a lot of your time and effort and energy. is it an important issue? coming here does serve the national interest and thank you for being here thun all for being here.
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>> tomorrow, a look at ways small businesses can protect companies from cyber attacks. fomer homeland security security secretary michael chertoff take part in the discussion starting live at 10:30 a.m. eastern. and later -- the debate over interrogation methods used by the cia leading up to the raid on osama bin laden's compound. that's what former attorney general michael mukasey, along with other former justice department and cia officials, live at 1:30 p.m. eastern, also on c-span. >> i'm newt gingrich, and i'm announcing my candidacy for president of the united states because i believe we can return america to hope and opportunity. >> with a field of republican presidential hopefuls beginning to take shape, follow the candidates' announcements and speeches on their road to the white house and look back at their careers online with the
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c-span video library. search, watch, clip and share with everything we've covered since 1987. it's what you want and when you want. >> from today's "washington journal," a look at the future of u.s./pakistan relations following the osama bin laden mission. this portion is about 20 minutes. to welcome shuja nawaz, the south asian director for the atlantic council. i want to share with you the headlines from the "new york times." as the rift deepens, senator kerry has a warning for pakistan. let me begin with that headline and ask you the state of u.s.-pakistan relations. guest: i don't think it's been as bad as it is now for many years and the only way now is probably up. but it will take a lot of effort on both sides, and i think senator kerry is probably one of the best people in washington
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that can help pakistan understand the kind of decisions that pakistan needs to make to sort out this relationship with the united states. host: 80 people killed over the weekend in what was billed as a response to the u.s. capture and killing of bin laden. is that the first of many types of terrorist attacks that we could likely see in the region? >> yes, and the death toll in that has gone up close to 90 now. there was another attack on a bus, suicide bomber in a bus in the heart of the punjab. this is going to be a pattern that we will see because the tariq taliban of pakistan, the ttp, the one that declared war against the state of pakistan, and has said it will avenge the death of bin laden, has associations with punjabi taliban groups in the heartland and that's going to be the way that they will try and scare the government and scare the population of pakistan. host: this coming at the same
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time that the u.s. drone attacks continue over pakistan. in terms of our relations with the country, what impact is that having? guest: that's a very interesting question. the real question for the pakistanis is, are they allowing the drones or will they continue to bemoan the fact that the u.s. is "infringing their sovereignty." they can't have it both ways. and in the joint session of the parliament, supposedly in camera, which we are now getting a lot of reporting from the people that attended it, when they were briefed by the head of the inter services intelligence and the air force senior staff about the bin laden raid, a lot of these issues came up and one of the things that emerged finally was a resolution saying that pakistan needs to stop the u.s. from carrying out drone attacks. but other thing that emerged out of the reporting of this closed-door session was the fact
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the pakistanis have provided an airfield called chumpsy which is used by the united states for launching some of the drone attacks. host: the pakistani prime galanny speaking to members of parliament in islamabad last monday, his first address the capture and kill of bin laden. i want to show you part of what he had to say and get your reaction. >> it is disingenuous for anyone to blame pakistan for -- or the state institution of pakistan, the i.s.i. and the armed forces for being in cahoots with al qaeda. it was al qaeda and its affiliates that carried out hundreds of suicide bomb, in nearly every town and city of pakistan and also targeted political leaders, state institutions, the i.s.i. and the general headquarters. the obvious question that has vexed everyone is how could osama bin laden hide in plain
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sight in the scenic surroundings of pakistan. allegations of complicity or incompetence are absurd. host: prime galani, two questions for you. who was the largest audience and why did he deliver the speech in english? guest: the speech in english was in order to address the foreign audience but the main message was for a domestic audience. this speech was his second public pronouncement on the bin laden killing. the first public pronouncement came immediately after the raid on abbottabad in which he proclaimed it a great victory. and then promptly got on a plane and went off to paris on a visit, when this was obviously a
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serious national emergency, and he could have called a meeting of his security chiefs, the army and the air force and the naval chiefs. never did that. the president of pakistan also lauded the attack, didn't raise any issues. this is kind of second parts on his part on coming back. i think he got probably a rocket from the army headquarters and there are those that believe even this speech may have been drafted by the military in order to set the record straight from their perspective. host: how do you pronounce the town? we've heard "abbottabad" and you just pronounced it as "abbottabad." aest: it's named after englishman named james abbott so it would be abbott-a-bad. the locals don't obviously pronounce it the perfect english
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way. they call it "abitabad." host: here's more from prime minister galani's speech from islamabad, the capital of pakistan, last monday. >> pakistan alone cannot held to account for flawed policies and slander. pakistan is not the birthplace of al qaeda. we did not invite osama bin laden to pakistan, or even to afghanistan. host: how was that speech received and it was viewed as credible by the foreign audience? guest: i don't think it was entirely credible. the point he's making is that pakistan alone is not responsible but i think pakistan has responsibility to itself to clarify its position, to clear the awful suspicions that have
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arisen as a result of that attack as to whether there was either complicity in supporting bin laden while he was in hiding or complicity even with the u.s. raid which they don't wish to acknowledge. this is another set of questions that is being launched at them. host: we'll get to phone calls in a moment. you can also join the conversation on our twitter page at shuja nawaz is a former television newscaster on pakistani t.v., he's worked for the world health organization and was the former director of the international atomic energy agency. our first call is paul joining us from tennessee. good morning. caller: i'm glad i'm the first guy that gets to talk to this fella right here because i hope you give him as much time as you give to others on c-span. i've been watching for a long time, if you're going to try to sit there and get me to believe
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that pakistan did not know osama bin laden was there, i won't believe it for a minute. remember, too, we've lost a lot of lives, not only 9/11, but we've had in war that's lost his life has been after this man. now, we got this man and now al qaeda or taliban or whoever it is is blowing up these places. i say, let's bring our boys home and if we have to come back, make that place over there a desert and get rid of these people, stop killing our boys. putting an x on their back and letting these people shoot at them and blow them up in mines, it's ridiculous. our government should be held accountable. why is john kerry the only man going to pakistan? come on, this liberal bunch is out of their minds and they're going to lose in the election coming up. going to be held accountable not only by me but by every mother, father, whose lost a kid, innocent in any way in this right here, they're
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going to be held accountable. host: thanks for the call, paul. guest: i think the caller is right. a lot of lives have been lost, good u.s. lives and the aftermath of the war in afghanistan has led to the insurgency inside pakistan, so over the same period, pakistan has lost something like 30,000 people, killed or wounded in attacks by the taliban inside the country and by other militants. if there is an easy way to end this fighting, i'm sure that would be the choice of people in pakistan as well as in the u.s. government. but what the government clearly is now planning is an orderly withdrawal so that it doesn't leave behind a chaos that we did leave behind in 1989 and 1990 after the soviets withdrew and afghanistan basically descended into chaos, out of which emerged the taliban. i think that's the history we don't want to repeat again and
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again. host: fareed zakaria rights this, "so far, pakistan's military has approached this crisis as it has with every other one in the past, using its old tricks and hoping to ride out the storm, it is leaking stories to favored journalists, unleashing activists and politicians, all with the aim of stoking anti-americanism. having been caught in a situation that suggests either complicity with al qaeda or gross incompetence, it is furiously trying to change the subject." guest: i follow the pages of the various chat books also, facebook, twitter, and other emails that i get from different parts of the civil and the military, and people are extremely unhappy with the situation, the fact that they don't know whether there was complicity or whether this was
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just sheer incompetence. what has really hurt the pakistan military is the fact that that is an organization which was ranked number one in public opinion polls inside the country in terms of respect and it risks losing that and i think that the humiliation of the attack has got them reeling. it's very critical for not just the army but government of pakistan to take charge. i think this is a great opportunity for the civilians to assert their control over the entire policy making apparatus and not simply outsource it to the military. host: our guest is with the atlantic council. you can log on to their web site to get more information, from the "london telegraph," a story about general musharraf who indicated that rogue elements may have helped bin laden. who would have been the rogue elements he was talking about? guest: i think he would be referring to people who are
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either in the lower reaches of the interservices intelligence or are ex-interservice intelligence but president musharraf is not a a very credible witness because he has been changing his story on this. after all, it was he who arranged to become a partner of the united states after having subjected the taliban government in kabul and it was done overnight. the unfortunate thing at that point after 9/11 was that nothing was put in writing. the u.s. nor pakistan put together an agreement that said these are our rights and responsibilities, this is what we expect from you. so over this period, pakistan has received something like $26 billion of overt economic and military assistance or reimbursements in order to help the united states fight this war against terror, over this 10-year period roughly.
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he was willing to take that money. it's not clear how much he was willing to help the united states in this effort. host: let's lock -- look at those physician as we listen to patricia joining us from kettering, ohio. caller: i hope i'm saying your name correctly, mr. nawaz. that fella who called before and said make this place a desert, i just think that reflects what many -- i won't say the majority -- but the conflict or the contrast between the way americans put value on american human life, which of course we should put value on american lives, but do people in pakistan and iraq, the way i'm understanding it in that part of the world, that many people look at americans as hypocrites in the way we put value on our lives, yet we don't seem to
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put -- or the majority of american people put value on say, for instance, the pakistani lives killed by drones or the iraqi lives killed by our unnecessary and immoral evasion of iraq. can you talk to us about the way pakistanis may look at americans in the way, that hypocrisy about the value of human life. if americans are saying they were sheltering o.b.l. or there's a possibility of pakistanis sheltering osama bin laden, i can't see how other people in that part of the world wouldn't say the u.s. is sheltering any kind of accountability in regard to, say, cheney and wolfowitz and fife and bush in regard to the loss of human life in iraq. so the value of human life, in both places, innocent human life, and also, why do you think
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the u.s. doesn't pressure pakistan, israel and india to sign that nonproliferation treaty. thank you, sir. host: thank you, patricia. guest: obviously, in my view, every single human life is immeasurable in terms of value. for the people that lose a father, a son, a daughter, or a husband, it's the end of the world. and clearly pakistan has had its share of losses, as i mentioned, something like 30,000 in this period. so you really can't compare the lives lost of americans versus pakistanis. i think all the losses are enormous and we should recognize them. in terms of the drones, most pakistanis get their information second or third hand, in any case, and so if the government has been saying from president musharraf into the current civilian government that they are against the drone attacks,
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while they've been continuing to support the drone attacks with logistical support and giving an airfield for the use of the drones to be launched from, that's the hypocrisy that pakistan is going to have to diveel and should. very interesting, the pugh global attitude survey in pakistan had two different numbers. the one most often repeated is that 59% of pakistanis polled saw the u.s. as an enemy. the one that's not often understood or repeated is that 64%, a larger number of pakistanis, said they want to have improved relations with the united states. so there is, in this very long history of the u.s.-pakistan among the people, certainly, a desire to have an improved relationship. it's the governments that have stood in the way and used the relationship for their own ends, for short-term purposes and
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that's been at the heart of it. on that score, i should say, i was very pleased when the spoke at west point in 2009 and he had two very telling paragraphs that were directly addressed to the people of afghanistan and the people of pakistan saying that in the future, those are the people he would have a relationship with and it wouldn't be with any single individual or group or institution. host: this headline from the times" this morning, also elsewhere, including the "chicago sun-times," says a trial may push the pakistani spy agency out of shadows. the piece focusing on a number of items, pointing out that a growing chorus on capitol hill using the discovery of bin laden's hide-out and mr. hendly's case leaving no doubt that the i.s.i. and pakistani overseers have played a cynical double standard with
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regard to the u.s. and pointing out that mr. headily might have been involve in the mumbai attacks from 2008. a lot of dots to be connected here. guest: absolutely, and i think we'll wait for the evidence to be presented particularly on the reported involvement of i.s.i. officers. this brings me back to the earlier comment which i didn't address, which was, can the u.s. bring india and pakistan together. i think india and pakistan need to bring themselves together. that's at the heart of all these issues. the spy versus spy games will continue until such point that the government in pakistan and the military in pakistan realizes that there is a need to normalize this relationship because it would benefit both sides. at the atlantic council, we've focused on this a lot. we've had a number of presentations of surveys and research which indicate that if they open up trade, their trade
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could rise from $2 billion a year today to somewhere between $40 and $100 billion a year, raising incomes on both sides of the border between india and pakistan. i see some signs, some glimmer of hope in my conversations in pakistan with the civil and with the military that perhap the enemy is now within the country, that there needs to be some kind of normalization on the eastern border with india and maybe that will remove the role of the intelligence agencies in fomenting insurgencies or terrorist attacks or >> tomorrow on "washington journal" eric pianin explains the $14.3 trillion debt ceiling and comments from the u.s. treasury and obama administration. and joseph gagnon talk about the
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economic debt ceiling could reach economic standing in the world. and first of a five-part series on the department of homelapd security. homeland security mickey mccarter examines the ways d.h.s. attempts to secure airlines. "washington journal" 7:00 a.m. on c-span. coming up on newsmakers, energy and national resources committee chitch senator jeff bingaman. after that on "road to the white house, 2012 presidential candidate newt gingrich and his remarks at the georgia republican party convention. also representative ron paul on his candidacy announcement tour in new hampshire. >> how do they transform, what series of choices do they make to become terrorists and kill hundreds of thousands of snem >> in his book "mastermind"
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richard mintier looks at the architect of the 9/11 attacks. >> this is a why who really mattered. understanding him is about understanding the future of the war on terror. now that bin laden is dead, that is what we have to fear, terrorist entrepreneurs like could lead shake mohammed. >> "signed the mind of a terrorist" tonight on c-span's q & a. also download a podcast of q & a, one of our signature programs available online at c >> you're watching c-span, bringing you politics and public affairs. every morning it's "washington journal" our live call-in journal about news of the day, connecting you with policymakers and journalist. watch live coverage of the u.s. house and week nights congressional hearings and policy forums and also supreme court oral arguments. on the weekends can you see our signature interview programs. saturday, "communicators" and


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